What is Long Term Care Insurance, and Should I Buy It?

One of the biggest fears that many of us have is losing independence.

What happens when you can no longer keep up with your house?  Where will you go if you can’t stay in your home?  And how will you pay for it?

Long term care insurance (also known as LTC or LTCI) is supposed to answer some of these questions.

What is Long Term Care Insurance?

This type of insurance policy is supposed to help you pay for different types of long term care as you age.  Long term care insurance is designed to pay for services that might come in your own home, at an assisted living facility, at an adult daycare, or in a nursing home.

You are supposed to be able to buy a policy, make premium payments, and then, when you need help with care due to illness, old age, disability, or some other difficulty, the long term care insurance provides the means for you to pay for services that might include anything from helping you manage day-to-day to providing you with certain health care services.

Many people choose to buy long term care insurance in order to help them protect their finances during old age, as well as to prevent being a burden on their families.  Long term care insurance can provide a way for you to be cared for later on, when you are no longer able to care for yourself.

Should You Buy Long Term Care Coverage?

Handwritten Insurance Claim Form with pen and calculator

Do you need long term care insurance?

  • 12 million Americans will need long term care in the year 2020.
  • 40% of the population of older Americans with long term care needs are poor or near-poor.
  • The average age of admittance to a nursing home is 79.
  • 40% of Americans who reach age 65 will enter a nursing home during their lifetimes.
  • The average length of a stay for discharged nursing home residents is 272 days, and the average length for current residents is 892 days.
  • 68% of Americans who reach age 65 will need help completing at least two “activities of daily living.”
  • The median annual nursing-home cost is $73,000.
  • The average annual base rate for an assisted living facility is $41,000.

As you can see, even if you aren’t in a nursing home permanently, or even if you never enter a nursing home, there is a good chance that you will end up needing some type of long term care.  It might just be help in your home, but you will still probably need it.  The cost of this long term care is one of the reasons that many people decide to buy long term care insurance.

It’s possible to self-insure against some of the costs associated with long term care, though.

The U.S. Department of Health says that 47% of Americans who enter a nursing home leave (go home or die) within a year.  Only 19% of those who enter a nursing home, according to the Health Department, end up staying more than five years.  This means that if you are smart about your resources, and start now to boost your retirement nest egg, you could very well manage to pay for your own long term care without the help of insurance.

When to Buy Long Term Care Insurance

Of course, it can make sense to decide to purchase long term care insurance, just to help hedge your bets.

Between long term care insurance, Medicare, and your own retirement savings, there is a good chance that you could have your long term needs taken care of, and allow you to live in comfort.

If you decide to buy long term care insurance, you need to think about when a good time to buy might be.  In most cases, there isn’t a need to buy this insurance when you are really young (say, 40).  However, you can benefit by purchasing a policy before you get too advanced in age.  The Morningstar article indicates that buying long term care insurance at age 55 or younger results in an average annual premium of $1,831 for a daily benefit of $150 for four to five years.  Wait to buy that same policy until you are 70, and you could pay $3,421 in annual premiums.

You should also consider where you are buying the insurance.

Will the insurance company be around to support you later?

Make sure that your insurer is highly rated, and that it is likely to be around for a long time.  Also, make sure you understand the policy.  Know what restrictions you can expect, and look for a policy that is likely to offer some flexibility in how you redeem it.

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Published or updated July 16, 2013.


  1. Thanks for point this out. But I guess I am still a little confused as to when I would need to start paying for this. Do you pay for it in your 20-30’s even though you will not need it until later on? Or do you wait until you are older?

  2. I bought Long Term Care insurance because I saw firsthand how long term care drained my Mother’s savings. My Mother live to nearly 99 years old The last 3 years she needed lot of care because of dementia. My wife nd I bought policies in our late 50s.

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