Is Long Term Care Insurance Worth It? Explore the Pros and Cons

pros and cons of long term care insurance

The Big Takeaways…

  • Long Term Care Insurance is a great option for many people, but with uncertain prices and a qualification process, it’s important to do your research to find the right plan.
  • It can be a challenge to determine exactly how much Long Term Care Insurance to purchase, but can be very worthwhile if you’re determined that you’ll need it.
  • After creating a NewRetirement account and setting up your plan, you can easily try different strategies for covering long term care insurance to find the right plan for you.



Whether to purchase long-term care insurance or not is a personal decision. Many people opt not to purchase it because it costs too much or they simply don’t know enough about it. While there are definitely some pros to getting coverage, there are many cons to long term care insurance — many of which have recently been in the spotlight.  So, is long term care insurance worth it?

Although Adam McCurdy, a financial planner with Foundation Capital Advisors, Inc. in Chicago, says determining “is long term care insurance worth it” is entirely situational, he outlined the following long term care insurance pros and cons to consider as you weigh your options.

Pros and Cons of Long Term Care Insurance

Con: There’s currently no certainty in pricing:  Given that long-term care insurance is relatively new—McCurdy says it’s in its “teenager phase”—pricing has been a major concern. Premiums offered now might change over time, and there’s still much debate over how to properly price different plans.

“It can be a big risk,” McCurdy says. “You can’t be sure whether the premiums will rise in the future, and there’s uncertainty about the insurance being accurately priced.”

Pro: Long-term care provides peace of mind:  If you’re the worrying type, long-term care insurance can ease your nerves. Once you take out a plan, you can rest assured that you’ll have some funds to support you and your health as you age.

“One thing it does, is that it gives a peace of mind, knowing that they will have money available if they ever need to go into assisted living or require home health services,” McCurdy says.

Con: It’s hard to figure out how much insurance you might need: Since it can be difficult to pinpoint the extent of benefits you might need down the line, taking out long-term care insurance becomes a risky endeavor, McCurdy says.

Long term care policies don’t insure you in all cases.  They only pay a fixed amount for a fixed period of time.

If you find a plan that guarantees $200,000 in benefits, for example, there’s no guarantee that this will be sufficient. The opposite also holds true: If you purchase more benefits, there’s a chance you won’t use them all.

“If you don’t use it down the road, then now you just wasted $600,000, for example,” McCurdy says.

Pro: It’s worthwhile if you’re sure you’ll use it:  Of course, it’s impossible to predict the future, but evaluating whether you’ll need long-term care is crucial to deciding whether insurance is right for you.

“If you knew 100% that a client was going to go into a nursing home, then it would make sense,” McCurdy says.

He recommends looking into family history to best gauge your likelihood of needing long-term care when you get older.

Con: Benefits may not be deployed as you need them:  As with any insurance, long-term care insurance has an elimination period, or a set length of time between an injury or health episode and the receipt of benefit payments. So should you enter a nursing home for two months, McCurdy says, there’s the potential that you’ll go the entire stay without receiving benefits, depending on your plan.

“Every time you go, there’s a chance that you won’t receive the benefit you’re paying for,” McCurdy says.

Pro: You really are likely to require long term care: According to the American Association for Long Term Care Insurance (AALTCI), 68% of people who are 65 and older will require long term care.

Con: You might not qualify: Most long term care insurers require that you pass a physical before they insure you and somewhere between 15-20% of applicants are denied coverage.  And, any health concerns will make your premium higher.

Pro: Out of pocket costs for long term care are expensive: While costs vary widely, the U.S. Department of Health and Human Services, reports that the average cost of long term care is $225 a day or $6,844 per month for a semi-private room in a nursing home.  This really adds up quickly and few can really afford these costs.  So, insurance may be a good way to insure that you are taken care of (at least for some period of time).

Who Should Buy Long Term Care Insurance?

Whether you need long term care insurance or not depends on your financial health.

Very Wealthy? If you are very very wealthy, you might be better off using your own money to pay for long term care expenses.

Low Income? If you have very little income, you probably can not afford the insurance.

Somewhere in Between? If you are somewhere in between, then knowing what to do is tricky.

Using a Retirement Calculator can be a useful way to figure out if you need long term care insurance or not.  A good calculator will give you a peek at your finances now and in the future — when you might need the care.  You can assess your cash flow and resources at various future dates and determine if they will be adequate for funding a long term care need.

After setting up an account and some baseline data, the NewRetirement retirement planning calculator enables you to try different what if scenarios for how you might fund long term care.  This is a very unique tool that enables you to really try out different strategies.

Are There Other Ways to Pay for Long Term Care?

The reality is that most of us are going to need some kind of long term care at some point in the future.

Another fact is that these services are very expensive.

So, is long term care insurance really worth it? What other options do you have to not go bankrupt paying for the care?

A deferred lifetime annuity is one option.  Putting money into a deferred annuity —  now or around the time you retire — can also be an efficient way to fund long term care.  With this strategy, you invest an amount of money to be paid out as monthly income to start at a date in the future.  So, if you are 63 right now, you might invest $100,000 to be paid out starting at an age when you think you might require long term care — maybe age 85.   When you turn 85, you will start receiving monthly payments which can be used to fund care or anything else you might need or want at that time.

Estimate the cost of a deferred annuity with an annuity calculator, explore other creative ways to fund a long term care need, or try any strategy out on your own finances with the NewRetirement retirement planning calculator.


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