Weekend Read - Is Long-Term Care Insurance Worth It?
03/18/2025I take pride in personally crafting each of these emails. Unlike many others in the industry who rely on prewritten content, I write these myself from scratch. My goal is to boil down complex concepts and share relevant news in an easy-to-understand format. I hope you find them both informative and enjoyable.
What Is Long-Term Care Insurance?
None of us like to think about a time when we might need help with basic daily activities, but the reality is, as we get older, the chances of needing some form of long-term care increase. Long-term care (LTC) insurance is designed to help cover the costs of care due when someone is no longer able to perform everyday activities on their own1. Whether it’s assistance at home, in an assisted living facility, or full-time care in a nursing home, a LTC policy helps pay for those services since Medicare and traditional health insurance don’t cover them2.
The Cost of Care: Home vs. Facility
If you’ve ever looked into the cost of long-term care or had a parent need it, you know it isn’t cheap. Here’s a rough breakdown based on the data from carescout.com. In my experience these numbers vary quite a bit based on where you live. Here in NJ things are quite expensive as you can see below.
The length of time people need care also varies. On average, it’s around 3.7 years for women and 2.2 years for men. Women tend to require care longer than men, largely due to living longer. 70% of people over the age of 65 will need some long-term care for an average of 3 years3.
Traditional vs. Hybrid LTC Policies
Years ago, LTC insurance was a “use it or lose it” deal just like car insurance, you paid into it, and if you never needed care, you got nothing back. Not surprisingly, a lot of people weren’t thrilled with that structure. I believe that lead to the creation of hybrid long-term care policies. These policies cover you if you need care, but if you don’t, your beneficiaries get a death benefit, or in some cases, you can even get a return of premium. The tradeoff? Hybrid policies don’t stretch your dollar as far as traditional LTC insurance, but they do offer more flexibility. They also typically have a finite payment period where as traditional LTC is for life.
Choosing the Right Policy: Home Care vs. Facility Coverage
One of the biggest things to think about is where you’d want to receive care. Some policies provide generous benefits for nursing homes but minimal coverage for home care. Others give you the flexibility to stay home for as long as possible. Your preference here will play a major role in which policy is right for you.
Can You Self-Insure?
Some people choose to self-insure, meaning they plan to use their own savings to cover long-term care expenses instead of buying insurance. If you have significant assets and don’t mind covering those costs yourself, this can work. But the risk, is if you need care for years, those expenses can add up fast. It’s important to do some real detailed analysis to make sure unplanned stay at a nursing home doesn’t impact your spouse’s security or your estate plans.
So, Is It Worth It?
There’s no one-size-fits-all answer here. If you’re someone with a lot of assets and a high-risk tolerance, self-insuring may be a reasonable option. If preserving your retirement savings and estate is a priority, a LTC policy, whether traditional or hybrid, could provide peace of mind at a cost. The key is planning ahead.
This is one of those financial decisions that’s easy to put off. If you’re wondering what makes the most sense for your situation, let’s talk. I’d be happy to walk you through the options.
If you’ve only recently joined my email list, you’ve missed out on many insights and updates that I've been sharing each week. Be sure to visit my blog to explore past content that you might find valuable.
Jeremy Raffer, MBA
Director & Wealth Manager
Author “Financial Planning for Widows”
m. 201-747-2705
w. rafferwealthmanagement.com
e. [email protected]
Steward Partners
115 W. Century Rd, Suite 145
Paramus, NJ 07652
1https://www.nia.nih.gov/health/long-term-care/what-long-term-care
2https://www.medicare.gov/coverage/long-term-care
3https://acl.gov/ltc
This material does not provide individually tailored advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies discussed in this material may not be appropriate for all people. Steward Partners recommends that investors independently evaluate particular strategies, and encourages you to seek the advice of a Wealth Manager. The appropriateness of a particular investment or strategy will depend on an your individual circumstances and objectives.
Steward Partners Investment Solutions LLC offers insurance products in conjunction with its licensed insurance agency affiliates.
Since long-term care insurance is medically underwritten, you should not cancel your current policy until your new policy is in force. A change to your current policy may incur charges, fees and costs. A new policy may require a medical exam. Actual premiums may vary from any initial quotation.
Guarantees and contractual obligations are backed by the claims-paying ability of the issuing insurance company.
AdTrax 7675023.1 Exp 2/26
What Is Long-Term Care Insurance?
None of us like to think about a time when we might need help with basic daily activities, but the reality is, as we get older, the chances of needing some form of long-term care increase. Long-term care (LTC) insurance is designed to help cover the costs of care due when someone is no longer able to perform everyday activities on their own1. Whether it’s assistance at home, in an assisted living facility, or full-time care in a nursing home, a LTC policy helps pay for those services since Medicare and traditional health insurance don’t cover them2.
The Cost of Care: Home vs. Facility
If you’ve ever looked into the cost of long-term care or had a parent need it, you know it isn’t cheap. Here’s a rough breakdown based on the data from carescout.com. In my experience these numbers vary quite a bit based on where you live. Here in NJ things are quite expensive as you can see below.
- In-home care from a home health aide adds up to around $6,500 per month for daytime care.
- Assisted living facility: Averages $6,500 per month.
- Nursing home (private room): Averages $13,500 per month.
The length of time people need care also varies. On average, it’s around 3.7 years for women and 2.2 years for men. Women tend to require care longer than men, largely due to living longer. 70% of people over the age of 65 will need some long-term care for an average of 3 years3.
Traditional vs. Hybrid LTC Policies
Years ago, LTC insurance was a “use it or lose it” deal just like car insurance, you paid into it, and if you never needed care, you got nothing back. Not surprisingly, a lot of people weren’t thrilled with that structure. I believe that lead to the creation of hybrid long-term care policies. These policies cover you if you need care, but if you don’t, your beneficiaries get a death benefit, or in some cases, you can even get a return of premium. The tradeoff? Hybrid policies don’t stretch your dollar as far as traditional LTC insurance, but they do offer more flexibility. They also typically have a finite payment period where as traditional LTC is for life.
Choosing the Right Policy: Home Care vs. Facility Coverage
One of the biggest things to think about is where you’d want to receive care. Some policies provide generous benefits for nursing homes but minimal coverage for home care. Others give you the flexibility to stay home for as long as possible. Your preference here will play a major role in which policy is right for you.
Can You Self-Insure?
Some people choose to self-insure, meaning they plan to use their own savings to cover long-term care expenses instead of buying insurance. If you have significant assets and don’t mind covering those costs yourself, this can work. But the risk, is if you need care for years, those expenses can add up fast. It’s important to do some real detailed analysis to make sure unplanned stay at a nursing home doesn’t impact your spouse’s security or your estate plans.
So, Is It Worth It?
There’s no one-size-fits-all answer here. If you’re someone with a lot of assets and a high-risk tolerance, self-insuring may be a reasonable option. If preserving your retirement savings and estate is a priority, a LTC policy, whether traditional or hybrid, could provide peace of mind at a cost. The key is planning ahead.
This is one of those financial decisions that’s easy to put off. If you’re wondering what makes the most sense for your situation, let’s talk. I’d be happy to walk you through the options.
If you’ve only recently joined my email list, you’ve missed out on many insights and updates that I've been sharing each week. Be sure to visit my blog to explore past content that you might find valuable.
Jeremy Raffer, MBA
Director & Wealth Manager
Author “Financial Planning for Widows”
m. 201-747-2705
w. rafferwealthmanagement.com
e. [email protected]
Steward Partners
115 W. Century Rd, Suite 145
Paramus, NJ 07652
1https://www.nia.nih.gov/health/long-term-care/what-long-term-care
2https://www.medicare.gov/coverage/long-term-care
3https://acl.gov/ltc
This material does not provide individually tailored advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies discussed in this material may not be appropriate for all people. Steward Partners recommends that investors independently evaluate particular strategies, and encourages you to seek the advice of a Wealth Manager. The appropriateness of a particular investment or strategy will depend on an your individual circumstances and objectives.
Steward Partners Investment Solutions LLC offers insurance products in conjunction with its licensed insurance agency affiliates.
Since long-term care insurance is medically underwritten, you should not cancel your current policy until your new policy is in force. A change to your current policy may incur charges, fees and costs. A new policy may require a medical exam. Actual premiums may vary from any initial quotation.
Guarantees and contractual obligations are backed by the claims-paying ability of the issuing insurance company.
AdTrax 7675023.1 Exp 2/26