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Should you buy long-term care insurance?


Allworth Co-CEO Scott Hanson outlines the basics of long-term care insurance.


With 10,000 Baby Boomers retiring each day, the question about whether a person needs long-term care insurance has become a popular one.


First, what exactly is long-term care?

Long-term care involves care and services designed to meet your health or personal needs over either a short or extended period-of-time. These services are intended to help people live as independently and safely as possible when they can no longer perform everyday tasks on their own. Long-term care can take place in your own home, with care provided by a live-in or hourly caregiver, it can take place in a live-in care facility, or care could be provided in a neighborhood center that a person visits during the day.

The average duration of long-term care is 3.7 years for women and 2.2 years for men. And while 70% of people will need long-term care, 20% of people will require it for more than five years.1


So, should you buy long-term care insurance?

While the answer is predictably complex, I’m going to break down the case for long-term care insurance as specifically as I can, starting with another question: If you had a health emergency that required constant or semi-constant care, how would you pay for it?

For context, rounding up slightly, here are the nationwide, monthly median costs for certain levels of care.

In-home care provider                      $30/hour
Assisted living facility $5,000.00/month
Semi-private room in a nursing home $8,000.00/month
Private room in a nursing home $9,000.00/month2

*As an aside, the above prices have risen 5% in the last two years.

Of course, the offerings, standards, and costs of both facilities and hourly care vary extensively from state to state and city to city, but depending on your needs and means, a stay in a top-notch, live-in care facility could easily exceed $12,000 per month. From a total expenditure perspective, let’s say a person enters a long-term care facility in Denver, Colorado, at $10,000 per month for three years. If you don’t have long-term care insurance, that’s a minimum of $360,000 out of pocket.

But you get the gist: It is expensive.

Some folks have saved enough that they can afford to self-insure and pay any amount of long-term care out of pocket. But what about people, say, a couple, who have saved $800,000? Should a couple with $800,000 buy a long-term care insurance policy?

The first thing you should do is meet with your advisor. Considerations like debt, expenses, your goals during retirement, family history, and any other assets you’ve accumulated, all must be taken into consideration before you commit to purchasing a policy.

So, the short answer to whether you should purchase long-term care insurance is … maybe. That is, if you’ve saved well, but don’t have generational wealth (and even possibly if you do), you should consider buying a long-term care insurance policy if you want to increase the odds that you’ll be able to leave your loved ones an inheritance.

A few things to know about the costs and eligibility of long-term care insurance. First, you must qualify. Typically, the younger and healthier you are, the easier it is to qualify and the lower your premiums will be. Here are some things that may disqualify you from long-term care insurance eligibility:

  • A major health condition (cancer, Alzheimer’s, heart disease, etc.)
  • A history of substance abuse
  • A criminal record
  • If you are over the age of 85 (this varies)

But even if one or more of the above applies to you, you still may qualify.

Another consideration is that prices for long-term care insurance, and for healthcare costs in general, are rising fast (5% in the last two years3). The long-term care insurance industry has taken a bit of a beating lately, in that, not only has the average lifespan of older people generally increased, and with them, long-term care durations, but also because a higher-than-expected number of people who purchased long-term care insurance kept their policies active rather than letting them lapse (just 1% of policy holders dropped their insurance, while the insurance industry based their premiums on the assumption that 4% of people would).

This has led to the insurers paying out billions more in claims than they had anticipated2, and that cost has manifested itself in the form of higher premiums.

Other things that impact your premiums include things like your family’s medical history (whether there’s a history of Alzheimer’s, for example), the age at which you buy the policy, and the duration and the amount of coverage you want to receive.

So, in the most general sense (and this is merely an overview and not to be taken as a recommendation to buy or bypass long-term care insurance, so please speak with your advisor before making any determination about long-term care), who should consider it?

  • People who can’t afford to self-insure.
  • People who can afford to self-insure but want to pass the risk to an insurance company.
  • People who want to be sure to leave virtually all their wealth to their heirs.


How much does long-term care insurance cost?

Prices and coverage vary, but roughly speaking, a 55-year-old man who buys long-term care insurance today will pay anywhere from $1,000 to $1,700 a year for a three-year policy for a $165,000 level benefit.3 A woman of the same age (55) will pay anywhere from $2,000 to $2,675 per year for comparable coverage (remember, the average duration of stay in long-term care for women is 1.5 years longer than for men’s).

So, on the list of financial cons, long-term care insurance is expensive, and if you buy it, you might be one of the 30% or so of people who never uses it. Just remember, however, that Medicare and regular health insurance do not cover stays in a long-term care facility.

But on the practical positive side, long-term care insurance can alleviate worry and take the burden off your family in the likely event that you require care.

In the final analysis, for many people, long-term care insurance, while expensive, is a good idea. But again, I cannot emphasize enough that there are numerous other considerations, so before embarking on the long-term care insurance journey, speak to your fiduciary advisor. By taking into consideration your overall financial situation and assessing your personal and legacy goals for the future, we can help you decide if it’s the right decision for you.


1 How Much Care Will You Need? | ACL Administration for Community Living

2 Median Cost of Nursing Home, Assisted Living, & Home Care | Genworth

3 How Much Does Long-Term Care Insurance Cost? - Ramsey (