How Much Does Long Term Care Insurance Cost? Is it Worth It?

How Much Does Long Term Care Insurance Cost? Is it Worth It?

Insurance can be a fantastic way to protect your assets from big unforeseen costs. Long term care insurance can, in theory, be a cost effective way to cover a long term care need. However, it can also be expensive and not best for everyone. So, let us explore: How much does long term care insurance cost? And, is it really worth it?

how much does long term care insurance cost

Who Needs a Way to Cover Long Term Care Costs?

It is not fun to talk about, but research suggests that at least 52% of people turning 65 today will need long term care at some point.

Long term care can include:

  • Nursing home care
  • Assisted living
  • Adult day care
  • In home care
  • Home modificiation
  • Care coordination

And, the really bad news? Long term care is prohibitively expensive. As an example, the Alzheimer’s Association estimates that end of life care costs can range between $217,820 and $341,651.

And, the really really bad news? These costs are NOT covered by Medicare!

So, EVERYONE needs to think through a way to cover long term care costs. However, long term care insurance is not the answer for everyone.

How Much Does Long Term Care Insurance Cost?

The cost of long term care insurance can vary greatly and purchasing the right plan is critical.

However, here are some average costs for 2018, as provided by the American Association for Long Term Care Insurance.

Average Long Term Care Annual Premium for a 55 Year Old (For Initial pool of benefits equal to $164,000 (each at age 55). Value of benefits when policyholder reaches age 85 equals $386,500 each.)

  • Single male, $1,870
  • Single female, $2,965
  • Couple, $3,000

Average Long Term Care Annual Premium for a 60 Year Old (For Initial pool of benefits equal to $164,000 (each at age 60). Value of benefits when policyholder reaches age 85 equals $333,000 each.)

  • Single male, $2,010
  • Single female, $3,475
  • Couple, $3,490

Average Long Term Care Annual Premium for a 65 Year Old (For Initial pool of benefits equal to $164,000 (each at age 65). Value of benefits when policyholder reaches age 85 equals $287,500 each.)

  • Single male, $2,460
  • Single female, $4,270
  • Couple, $4,675

Are Average Costs Reliable for What You’ll Actually Pay for Adequate Coverage?

As with most insurance products, the devil is in the details.

With long term care insurance you want to understand if your plan will give you inflation protection and understand exactly what kind of care is covered.

A truly high quality plan that will provide the benefit you really need when you need them may be prohibitively expensive.

So, Is Long Term Care Insurance Worth It?

It all depends.

Factors you will want to consider include:

Age: While long term care insurance is less expensive annually when you are younger, you will actually pay more out of pocket over your lifetime if you buy it early.

Health Prognosis: If you are worried that you might not qualify for long term care insurance at an older age or that you’ll need the care in the near future, then the peace of mind of buying earlier may be worth it.

Your Support Network and Finances: There are alternatives to Long Term Care Insurance that may be viable depending on your finances and support network.

In general:

  • People with significant financial assets (more than $2.5 million) might be better off self insuring and covering costs out of pocket.
  • Households with limited assets should not purchase the insurance unless the premiums are well within their lifelong budget.
  • People in the middle need to really explore their options carefully.

Alternatives to Long Term Care

From insuring with a hybrid life and long term care policy, planning for costs with a lifetime annuity or planning to have a loved one care for you, there are many alternatives to insurance. Learn about longevity annuities.

Explore creative ways to cover a long term care need.

How Should You Plan for Long Term Care in Terms of Your Retirement Financial Plan?

The NewRetirement Retirement Planner has numerous features that can help you with planning for a long term care need.

1) Long term care costs are built into the model. If you look at your cash flow chart, you will see your expenses balloon at your goal age. These costs represent the potential for a long term care need.

2) You can explore different ways to cover this possible expenditure on the My Plan > Medical page. See what happens to your finances with:

  • A long term care policy
  • Coverage with a lifetime annuity
  • Care provided by a loved one
  • Drawing down assets and being covered by Medicaid
  • Tapping into your home equity