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 to Plan for 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 modification
  • Care coordination

And, the really bad news? Most versions of long term care can be prohibitively expensive. At the high end is memory care. The Alzheimer’s Association estimates that the average total lifetime cost of care was $373,527 in 2020 for an Alzheimer’s patient.

And, the really really bad news? These are out of pocket costs. Most long term care is 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 2021, as provided by the American Association for Long Term Care Insurance.

Buying at 55

The average annual premium, if you purchase insurance at age 55, are as follows. (For a policy with an initial pool of benefits equal to $165,000, growing at  3% yearly.)

  • Single male, $2,220
  • Single female, $3,700
  • Couple, $5,025

Buying at 60

The average annual premium, if you purchase insurance at age 60, are as follows. (For a policy with an initial pool of benefits equal to $165,000, growing at  3% yearly.)

  • Single male, $3,525
  • Single female, $4,300
  • Couple, $5,800

Buying at 65

The average annual premium, if you purchase insurance at age 65, are as follows. (For a policy with an initial pool of benefits equal to $165,000, growing at  3% yearly.)

  • Single male, $3,135
  • Single female, $5,265
  • Couple, $7,150

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.

You will also want to explore if the plan is combined with life insurance or has other benefits.

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 too 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
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