As they age, many seniors will need help with the activities of daily living, such as getting dressed or using the bathroom. More than two-thirds of today’s 65 year-olds will need some type of long-term care service, according to the Administration for Community Living. Often, this care can be provided at home by friends and family members, but just over 42% of seniors will need paid care. 

Seniors who find themselves in need of paid long-term care services may be surprised by how much they cost. According to Genworth Financial’s 2020 Cost of Care Survey, American seniors pay an averaging  of $51,600 per year for assisted living care. Seniors who require the more extensive care provided by nursing homes could pay around twice that.

Annual Median Costs of Long-Term Care Services

$53768

Homemaker Services

$54912

Home Health Aide

$19240

Adult Day Health Care

$51600

Assisted Living Facility

$93075

Nursing Home Facility (Semi-Private Room)

$105850

Nursing Home Facility (Private Room)

Financial assistance may be available for seniors who need help paying for long-term care. Medicare and Medicaid may cover some services, while long-term care insurance may offer flexible coverage for those with a policy. 

In this guide, we’ll explain the basics of long-term care insurance, including what it covers, how it compares to Medicaid and Medicare, and how much it costs.

What is Long-Term Care Insurance? 

Long-term care insurance helps seniors pay for the long-term services and supports they need, such as home care or assisted living care. Private insurance companies sell these policies. Coverage varies from one plan to another, but they tend to offer more options than Medicare and Medicaid. 

Medicare and Long-Term Care

Medicare is the U.S. government’s health insurance plan for people 65 years of age and older. Seniors can choose between Original Medicare and Medicare Advantage.

Original Medicare includes Part A (Hospital Insurance) and Part B (Medical Insurance). Part A covers various hospital-related services, while Part B covers an assortment of medically necessary and preventive services. Part D is an optional add-on that provides drug coverage. Medicare Advantage is an all-in-one private alternative that includes all Part A and B services, and usually Part D. 

Both types of Medicare coverage may offer some coverage for long-term care services and supports. Medicare pays for home health services when seniors are certified to need intermittent skilled nursing care or skilled therapy services. It doesn’t cover non-medical home care, such as homemaker services or personal care, when that’s the only care seniors need. 

Medicaid and Long-Term Care

Medicaid is a health insurance plan that covers some people with low incomes and limited assets. Nationwide, 7.2 million seniors are enrolled in both Medicaid and Medicare, according to the Centers for Medicare and Medicaid Services.

This program covers the care eligible seniors receive in Medicaid-certified nursing homes. States can choose to provide coverage for other types of long-term care through Home and Community Based Services waivers, such as home health care, adult day care and assisted living care. 

Limitations of Long-Term Care Insurance

While long-term care insurance may provide more coverage options than Medicare and Medicaid, these private plans have limitations. 

Cut-Off Age

There’s often a cut-off age for long-term care insurance policies, and if seniors wait too long, they may not be able to get coverage. Few insurers accept applicants who are 75 or older, according to the American Association for Long-Term Care Insurance

Pre-Existing Conditions

Insurers may decline coverage to seniors with pre-existing conditions. For example, seniors may be denied coverage if they have Alzheimer’s disease, kidney failure, Parkinson’s disease or other serious conditions. Seniors who currently need home care, assisted living care or other long-term care also won’t be able to buy a policy. 

What Does Long-Term Care Insurance Cover?

Long-term care insurance policies may offer coverage for a variety of long-term care services, including:

  • Nursing home care
  • Assisted living care
  • Memory care
  • Adult day care
  • Home care
  • Home health care
  • Hospice care
  • Respite care

Policies may have rules about where you receive these care types. For example, you may be required to receive care in a state-licensed facility or a facility that cares for a certain number of seniors. Read the policy carefully to learn what coverage you have. 

Benefit Limits

Most long-term care insurance policies limit the dollar amount they’ll pay for certain services. For example, a policy may cap nursing home coverage at $200 per day. Maximum lifetime benefit limits are also common. Depending on the policy, this limit could be expressed as a dollar amount or a number of years. 

What Does Long-Term Care Insurance Not Cover?

Some long-term care insurance policies don’t cover residential senior care. Others define assisted living facilities differently and may not pay for care seniors receive in facilities designated as “homes for the aged” or “personal care homes.”

Homemaker services, a type of in-home care for seniors who need help with housekeeping, isn’t included in all long-term care policies. Coverage for other types of home care may be limited. For example, some policies only cover home care when it’s provided by a licensed provider. Most policies won’t pay for seniors to hire their family members as caregivers.

How Much Does Long-Term Care Insurance Cost? 

Long-term care insurance premiums will vary based on a seniors’ age and medical history. In general, premiums get more expensive as you get older, and discounts may be available to seniors in good health.

The average annual premium for a 55-year old man starts at $950 per year, according to the American Association of Long-Term Care Insurance, while a 55-year old woman pays around $1,500. A combined policy for a 55-year old couple comes in at $2,080. 

For seniors who buy a policy at 65, average premiums are much higher. A single man may pay $1,700 per year, while a single woman may pay $2,700. A 65-year-old couple who opts for a combined policy could pay around $3,750. 

Some long-term care insurance policies offer inflation protection. The benefit pool increases by 1%, 2%, 3% or 5% annually to help seniors keep up with future long-term care costs. These policies are more expensive. 

Should I Buy Long-Term Care Insurance?

Long-term care insurance policies aren’t necessary for all seniors, the National Association of Insurance Commissioners explains. Seniors shouldn’t buy a policy if they can’t afford the premiums, or if they have trouble paying for other important needs. Seniors with limited incomes and assets, such as those who receive Supplemental Security Income or Medicaid, are also unlikely to benefit. 

For other seniors, buying long-term care insurance may be an essential part of retirement planning. High-income seniors, or those with many assets, may consider buying a long-term care policy to protect their earnings and savings. Seniors who want the flexibility to choose where they receive care may also benefit from this coverage. For help deciding if you should buy long-term care insurance, talk to a trusted financial professional.