Long-Term Care Insurance Guide

By 2030, 1 in every 5 Americans will be a senior and by 2040, more than 14 million of them will be 85 or older. As the population ages, health care needs become a greater concern. And while long-term care is a reality for many Americans, few are financially prepared for the costs. Whether care is needed at home, in an assisted living facility or a nursing home, the expenses can be significant. Yet, only about 2% of the U.S. population has long-term care insurance.

Let’s discuss what long-term care is, who may need it and how planning for LTC insurance may help you preserve your financial independence and protect your legacy.

WHAT IS LONG-TERM CARE?

According to the National Institute on Aging, long-term care is a variety of services designed to meet a person’s health or personal care needs when they can no longer perform everyday activities on their own.

Generally, someone who needs help with health and personal care needs is considered chronically ill if they can’t perform at least 2 out of 6 “Activities of Daily Living” without assistance. These ADLs include:

• Eating
• Bathing
• Dressing
• Toileting
• Transferring
• Continence

Individuals who require supervision due to dementia also meet the definition of needing long-term care.

THE LIKELIHOOD OF NEEDING CARE

According to LongTermCare.gov, 70% of those turning 65 today will need care at some point in their remaining years. On average:

• Women need care for 3.7 years
• Men need care for 2.2 years

WHERE YOU RECEIVE LONG-TERM CARE

Long-term care is generally delivered in one of four settings:

• Home Care – Licensed caregivers assist with daily activities and supervision
• Assisted Living Facilities – Similar to home care but often more affordable for those needing more than 8–10 hours of care per day
• Nursing Homes – Provide assistance with ADLs and skilled nursing (for example, wound management, medication or injections)
• Memory Care Facilities – Specialized care environments for individuals with dementia

THE COST OF LONG-TERM CARE

The cost of long-term care varies based on the setting and your location.

Source: CareScout 2024 Cost of Care Survey

If you’re age 55 today and costs continue to rise at a 3.5% inflation rate annually, the same assisted living facility that costs $70,800 today will cost nearly $200,000 by age 85. Three years of care could total $600,000 or more.

This is why we believe in planning for long-term care – and in some cases, purchasing LTC insurance to help defray these costs.

HOW TO PAY FOR LONG-TERM CARE

Now that you’ve heard how expensive care can be, you might be wondering how most people manage to pay when long-term care becomes necessary. Most LTC expenses end up being covered through a combination of sources.

Medicaid

• The largest payor of LTC in the U.S.
• Generally only covers individuals who have spent nearly all of their assets
• Getting qualified often involves complex asset and income strategies

Medicare

• Offers limited benefits and requires a preceding hospital stay of at least three nights
• After discharge:
  • Days 1–20: Medicare covers 100% of care costs
  • Days 21–100: Patient pays $209.50/day (in 2025); Medicare covers the rest
  • After 100 days: Medicare coverage ends

Savings and Investments

• Many choose to self-insure, using personal assets to pay for care
• Can impact retirement income, spousal support and legacy goals

Long-Term Care Insurance

• Helps protect you from needing to spend assets to pay for care
• Can support spousal needs and wealth transfer goals

TYPES OF LTC INSURANCE

You have options. Let’s explore the key features of each type.

Traditional Policies

• Have been available for decades
• Tend to be more affordable
• Have a shared benefit feature – if a couple is insured under the same policy, unused benefits may transfer to the surviving spouse
• Downsides:
  • Only pay for LTC – if care isn’t needed, benefits go unused
  • Premiums can increase in future years

Hybrid Policies

• Usually structured as life insurance contracts (or sometimes annuities)
• Allow the insured to use the death benefit and often an additional pool of funds to pay for care
• If care isn’t needed, a death benefit is paid to the beneficiaries
• Premiums are guaranteed not to increase
• Downsides:
  • Typically more expensive than traditional policies

Premiums for both types of policies can vary significantly, depending on the level of benefits you choose. So, it’s important to get comfortable with the policy details to choose the right one for you.

WHY LONG-TERM CARE CAN BE SO BENEFICIAL

Planning for long-term care isn’t just about protecting assets; it’s about preserving dignity, independence and family wellbeing.

At Edelman Financial Engines, we believe that protecting what you’ve built is just as important as growing it. That’s why our advisors work closely with our internal insurance experts to help you evaluate coverage options, understand trade-offs and make informed decisions tailored to your unique circumstances.

Whether you're reviewing existing coverage or exploring new strategies, we’re here to help with additional resources and insights that support your long-term financial well-being – no matter what life brings.