- Medicare does not cover long-term care support and services, only medical necessities.
- Traditional long-term care insurance will cover the cost of long-term care services, whether delivered at home or elsewhere.
- Monthly costs for long-term care can range from $1,700 to almost $10,000. Traditional long-term care policies can help ensure your retirement savings last.
What Is Traditional Long-Term Care Insurance?
Traditional long-term care insurance is a straightforward insurance policy that covers long-term care expenses. It is somewhat similar to car insurance in the sense that you pay a regular premium that might increase over time, but if you do not require its services, you have no claim on any benefits.
Americans over 65 are 70% likely to need some form of long-term care, with most needing three years or more, according to a report from the Administration for Community Living. Family and other unpaid caregivers cannot always adequately support that need, and Medicare does not cover long-term care services. That’s where long-term care insurance comes in.
The length and ultimate cost of long-term care will vary greatly depending on the services you need. Long-term care insurance can keep you from running through your retirement savings to pay for them. It’s important to understand the kinds of services and support traditional long-term care insurance offers, what it can cost and the tax implications.
As both the simplest and lowest cost type of long-term care insurance, a traditional long-term care insurance policy is one of the best ways to protect yourself, your family, and your assets against the significant likelihood that you will need long-term care services.
Long-term care is comprised of a whole suite of services to assist you in the daily acts of living, such as eating, dressing and bathing, as well as home assistance services like shopping and meal preparation. These services can be provided to you in your own home or at an adult daycare services center. You could also receive them in a nursing home or a facility that offers short-stay respite care.
Traditional long-term care insurance can provide you with flexibility and control when it comes to choosing your care options. For example, depending on the policy you choose, your traditional long-term care insurance might also cover professional nursing services, physical or occupational therapy, hospice care and more.
Traditional long-term care insurance can help you protect your retirement assets and prevent financial hardship, but it does come with a cost. Like other types of insurance, you will pay a monthly premium, which may rise over time.
Your age, gender, health history and marital status will all impact the cost of your premium. Women, who typically live longer, pay more than men for the same coverage. Some insurance providers offer lower rates to couples who bundle policies together or to those who pay in a lump sum rather than monthly.
2023 Average Annual Premium of a Traditional LTC Policy with $165,000 Coverage
|55 years old||$900||$1,500|
|60 years old||$1,200||$1,960|
|65 years old||$1,700||$2,700|
The combined average for couples is $2,080 at 55, $2.550 at 60, and $3,750 at 65.
Long-term care insurance premiums can be tax deductible. In fact, in 2023, the tax deduction limits increased around 6% to 7% while the benefits remain tax free, according to the American Association for Long-Term Care Insurance. If you are self-employed or own a business, you can claim tax deductions when you purchase your insurance.
The older you are, the more you can deduct. If you’re between 51 to 60, you can deduct up to $1,790. If you’re 61 to 70, you can deduct up to $4,770. At 71 and over, you can deduct $5,960. Check with a tax professional for the details of your policy and tax situation.
Pros and Cons of Traditional Long-Term Care Insurance
Like all insurance policies, traditional long-term care insurance has advantages and disadvantages. There are other types of long-term care insurance that might better suit your needs.
Pros and Cons of Traditional Long-Term Care Insurance
|Traditional Long-Term Care Insurance||
Traditional Long-Term Care Insurance vs. Hybrid Long-Term Care Insurance
Hybrid long-term care insurance builds a cash value, as well as covers the costs of long-term care services. So, if you don’t need long-term care services, you can pass the cash value along to your beneficiaries. Traditional long-term care insurance policies are less expensive than hybrid policies and are generally less complex.
Both types protect your retirement savings from the potential costs of long-term care services and support. But the risk with a traditional policy is that you might derive no further benefit from it other than peace of mind.
Is Traditional Long-Term Care Insurance Right For You?
Needing long-term care in your later years is increasingly a fact of life. Whether you’re temporarily recovering from an accident or illness, or you’re simply unable to care for yourself independently anymore, most Americans will require some form of long-term care support or service after 65.
Without insurance, long-term care can be expensive. The average monthly cost of care can range from $1,733 for adult daycare assistance to $9,584 for a private room in a nursing home. And those costs will increase with time.
Traditional long-term care insurance might be right for you if you want to ensure your savings last throughout your retirement.
Talk to an insurance professional about your options to be sure you’re getting the choices and coverage most appropriate for your circumstances.
FAQs About Traditional Long-Term Care Insurance
Traditional long-term care insurance works similarly to car insurance — you pay a regular monthly premium but only submit a claim if you require its services.
Traditional long-term care insurance covers only the cost of long-term care support and services. Hybrid policies, which are more expensive, build a cash value and have a death benefit that you can pass along to your beneficiaries.
Every individual’s needs will vary. Do you simply want to cover any long-term care costs, or do you want to leave a financial legacy for your beneficiaries? Your family health history will also provide insight into the kind of coverage you need. Be sure to discuss your needs with a qualified insurance professional.