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Long-Term Care Insurance

As we get older, it may become more difficult to take care of ourselves. Simple things like cooking a meal, taking a shower, or even going to the bathroom may suddenly seem like impossible tasks. 

When we need help with day-to-day activities, we do not want to become a burden to our families. Our family members have plenty to worry about already. That is where long-term care comes in.  

What Is Long-Term Care?

Long-term care is a form of assistance in which a professional can help with daily living activities. There are three typical ways long-term care is provided:

  • Home Care: Someone comes to where you live for a specific number of hours per day to ensure you bathe, eat, take your medicine, and live in a clean environment. 
  • Assisted Living Facilities and Nursing Homes: Assisted living facilities are also long-term care providers. These facilities offer a full-time home to those who need additional help. 
  • Adult Day Care: There are several adult daycare options where your family members can drop you off while they go to work and pick you up on the way home. All with the peace of mind of knowing you are cared for during the day. 

Essential Activities of Daily Living

You will quality for Long-Term Care if you need help with 2 of the 6 activities of daily living. These activities include:

  • Bathing
  • Incontinence care
  • Dressing
  • Eating
  • Using the toilet
  • Moving from the bed to a chair, or moving from one position to another

Simply put, long-term care providers do everything they can to make sure we are, clean, comfortable, well-nourished, and able to enjoy our lives, even when our bodies do not want to comply. 

Long-Term Care Costs

Long-term care can be overwhelmingly expensive, so expensive in that it can drain a nest egg in a matter of years. The average costs of different types of long-term care are:

  • Home Health Aide: The average home health aide will cost around $54,912 per year. 
  • Homemaker Services: Homemakers help with cleanliness and meal prep and typically cost an average of $53,772 per year. 
  • Adult Daycare: Adult daycare is the lowest-cost form of long-term care and costs an average of $19,236 annually. 
  • Assisted Living Facility: The typical cost for a private one-bedroom space in an assisted living facility is $51,600 per year. 
  • Nursing Home: A semi-private room in a nursing home costs an average of $93,072 per year, while a private room will set you back about $105,852 per year. 

So, with $250,000 you can live for about two and a half years in a nursing home, or around five years in an assisted living facility. 

Chances of Needing Long-Term Care

You may think, “I will never need long-term care services,” but that might not be true. According to, about 70% of Americans ages 65 and older will need some sort of long-term service. 

Men typically need long-term care for 2.2 years of their lives, while women typically need these services for an average of 3.7 years. However, 20% of consumers will need long-term care services for more than five years. 

You have more of a chance of needing long-term care services in the future than you have of not needing them. 

Ways to Pay for Long-Term Care

At a minimum, an adult daycare will cost more than $19,000 per year, and you could end up spending more than $100,000 per year if you need a nursing home. So, how do you pay for it? Some common options are: 

  1. Personal Resources: If you have a large sum of money, it may be enough to cover your long-term care needs. 
  2. Medicare and Major Medical Health Insurance: Your Medicare or major medical health insurance plan will likely not cover the cost of long-term care. 
  3. Medicaid: Medicaid typically has coverage for long-term care costs. 
  4. Long-Term Care Insurance Policies: You can prepare for the cost of long-term care by purchasing an insurance policy to cover these costs prior to needing care. 
  5. Life Insurance Policy or Annuity Contract: Life insurance policies and annuities gain in value over time. You may be able to cash in on the value of these policies to cover your cost of care. 
  6. Hybrid/Combination Life Insurance Policies and Annuity Contracts: You can also find a policy or contract that is designed to cover your long-term care and provide life insurance benefits.

What Is Long-Term Care Insurance?

Long-term care insurance is a type of insurance policy that is designed to cover your long-term care expenses. 

You work with an insurance agent to determine the amount of coverage you need and the premiums that are most affordable to you. From there, the insurance agent shops the long-term care insurance market to find the policies that best fit your needs at the lowest possible cost. 

However, there are a few things you should consider before you sign up for a long-term care insurance policy. For example, you should know your policy options, the tax advantages associated with investing in long-term care insurance, and the general cost of insurance. 

Long-Term Care Insurance Options

If you are interested in purchasing a long-term care insurance, you will have two options to choose from – traditional long-term care insurance policy or a hybrid long-term care rider. 

Traditional Long-Term Care Insurance Policies

Traditional long-term care insurance policies are harder to come by today than they were in the past. With these policies, you typically pay a set premium for life, and if you need long-term care, your benefit will help you. There are a few things to consider before you sign up for a traditional policy:

  • Policy Amount: You pick the total amount of coverage you would like when you sign up. 
  • Length of the Coverage: You do not want your coverage to end while you still need it. 
  • Waiting Period: You will have to wait a predetermined period of time before you access your benefits. You may have multiple options in terms of the waiting period, so be sure to discuss this with your insurance agent. 

Many insurance companies have stopped offering these plans. It is also important to keep in mind that the cost of a traditional long-term care policy may rise after you have signed up based on inflation and the increasing cost of care. 

Hybrid Long-Term Care Insurance Riders

Hybrid long-term care riders are just as they sound. These are hybrid products that combine a rider for long-term care with other financial needs, like the death benefit of a life insurance policy or the income benefit of a fixed annuity. There are two different types of hybrid long-term care policies.

  • The Life Insurance Hybrid: Some life insurance policies allow you to accelerate your death benefit if you need access to funding for long-term care. That means that if you need long-term care coverage, you will have it available. On the other hand, if you do not use your death benefit for long-term care, your heirs will receive it when you pass away. 
  • The Annuity Hybrid: When you sign up for an annuity, you make a large lump-sum investment or agree to make regular payments. When you need the money, you receive a higher dollar amount than you initially invested. These products typically provide income throughout retirement, but they can also provide coverage for long-term care expenses. Moreover, money in your annuity grows on a tax-free basis. If you use this money for long-term care, it will be completely tax-exempt. 

If you are not sure which option is best for you, consider speaking with your insurance agent for more details. 

    Tax Advantages of Buying Long-Term Care Coverage

    Long-term care insurance is considered a tax-advantaged investment by the IRS. This makes sense because the United States government often rewards those who consider saving for future costs, and long-term care insurance is just that. 

    This means that you will not pay income tax on a percentage of the money you pay for your long-term care insurance premiums, up to the entire amount. The deduction amounts for these tax benefits increase as you age. Here is a chart to show how much income you can offset for tax purposes with long-term care insurance:


    Tax Deduction

    Under 40 Years Old

    Up to $450 per Year 

    41 to 50 Years Old

    Up to $850 per Year

    51 to 60 Years Old

    Up to $1,690 per Year

    61 to 70 Years Old

    Up to $4,520 per Year

    71 Years Old and Over

    Up to $5,640 per year

    How Much Does Long-Term Care Insurance Cost?

    • As with any other insurance policy, long-term care insurance premiums vary based on a wide range of factors. Those factors include:

      • Your Age: The insurance company takes a higher risk when it insures older individuals. Therefore, you will pay more for long-term care insurance as you age. 
      • Gender: Women typically live longer and have a greater chance of needing long-term care. As such, women usually pay more for long-term care insurance than men. 
      • Marital Status: You will usually pay a lower premium if you are married than you will if you are single. 
      • Coverage Amounts: The more coverage you need, the higher your premiums will be. 

      According to the American Association for Long-Term Care Insurance, a 55-year-old male in good health will pay about $950 per year for a long-term care insurance policy valued at $165,000. On the other hand, a 55-year-old female in good health can expect to pay about $1,500 per year for the same amount of coverage.  

    How to Buy Long-Term Care Insurance

    The good news is that it is not difficult to get your hands on a quality long-term care insurance policy. Here are the steps to follow to do so:

    1. Contact an honest insurance agent that is happy to help you find a plan. 
    2. Discuss your needs and financial standing. 
    3. Work with your insurance agent to determine the amount of coverage you need and the premiums you can afford. 
    4. Give your agent a short while to compare your options and find the best policies to meet your needs. 
    5. Follow your agent’s lead to complete your policy purchase. 

    State Medicaid Programs for Long-Term Care Insurance

    In most cases, you must spend down your assets until you have $2,000 left before Medicaid will step in to cover the cost of long-term care. There generally a five-year lookback period where the state will look to see if it can reclaim the assets that you have spent or have given away. 

    Get In Touch to Learn More About Your Insurance Options

    You do not want to be not covered when you need care the most. Long-term care insurance can help ensure that is never the case. Contact me today to discuss your long-term care insurance options. 

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