Long-term care insurance

Long-term care insurance is a policy that reimburses costs for extended personal care services, such as in-home care, assisted living, or nursing home facilities. Genworth’s 2023 Cost of Care Survey found that the median annual cost for a private room in a nursing home is $108,405.

Policies often start paying benefits when you cannot perform two of six activities of daily living, including bathing and dressing. Medicaid covers long-term care for low-income individuals after they spend down assets, while Medicare typically pays only up to 100 days of skilled nursing facility care post-hospitalization.

Insurers like Mutual of Omaha and New York Life offer policies with inflation protection riders that increase future benefit amounts by 3% to 5% per year, according to a report from YourInsurance.info. Standard elimination periods are 30, 60, or 90 days; premiums decrease as elimination periods lengthen.

The American Association for Long-Term Care Insurance states that about 7.5 million Americans have some form of long-term care coverage as of 2023. Applicants aged 55–65 face average annual premiums ranging from $1,700 (single male) to $2,800 (single female), based on the 2022 AALTCI Price Index.

Underwriting includes health history reviews; common reasons for denial include diagnoses like Alzheimer’s or Parkinson’s disease. Benefits paid under tax-qualified long-term care policies usually receive favorable federal tax treatment according to IRS Publication 502.

Hybrid policies combine long-term care with life insurance or annuities and comprised over half of new LTC sales in the US in 2022 per LIMRA data.