Long-Term Care Insurance

You can't predict your health care costs in retirement, but you can plan for them. Use these tips to prepare for covering potential long-term care insurance costs.

On this page:

Long-term care defined

Long-term care is a blanket term for the various services (medical and non-medical) required by people who are too chronically ill or infirm to take care of themselves.

Some people pay for long-term care as they need it, some purchase long-term care insurance in advance, some rely on spouses and family to provide care, and others combine these resources.

Paying for long-term care can be challenging, mostly because you don't know if, when, or how much of it you may need. Taking stock of your resources can help with planning.

Estimate long-term care expenses

A good place to start when estimating how much money you can devote to long-term care is by asking these questions:

  • Can you reserve a percentage of your savings, investments, home equity, or retirement funds to pay for care?
  • If you purchase long-term care insurance, will you be able to afford the premiums for the rest of your life?
  • If you or your spouse depletes your assets, will the other remain financially secure?

Next, have a candid talk with your family. If the need for long-term care arose, would your spouse, children, or other family or friends be willing to provide:

  • Hands-on care. Which family member would be the primary caregiver? Would this require a move by you or the caregiver?
  • Financial support. Will your family chip in to purchase long-term care insurance?
  • Care and support. If one or several family members were the caregivers, would the others contribute financially? If so, how much?

Getting family to commit to these responsibilities can be a difficult conversation, but their time and contributions could greatly offset your long-term care expenses.

Long-term care insurance

Long-term care insurance premiums vary widely, depending on factors such as the age, health, and gender of the purchaser(s) and where the insurance is purchased.

You'll have to weigh the expense of premiums against the risk that you might have to pay someone to help you with the activities of daily living, such as bathing, dressing, toileting, transferring, or eating. Currently, the average stay at a nursing home is nearly 2.5 years, and that does not include any care they need or may have received in their home, assisted living, adult day care, etc.1 The annual average cost of care in a nursing facility now exceeds $92,860 (semi-private room) and $105,266 (private room).2

Bottom line? Long-term care insurance is expensive. But without it, extended long-term care could quickly deplete your nest egg.