How much should you pay for long-term care insurance? Let’s say you’ve been offered a policy for $500 per month, or $6,000 per year. While the results will vary widely based on your health, age, gender and household size, for most individual policies, this would be expensive. However, it really depends on your personal circumstances.
According to the American Association for Long-Term Care Insurance, a single 55-year-old man might spend about $900 per year for a $165,000 policy. On the other hand, a 65-year-old couple with generous benefits would pay $9,575.
Do you have questions about long-term care planning? Speak with a financial advisor today.
Do You Need Long-Term Care Insurance?
Long-term care insurance is a policy that can pay for residential or in-home healthcare, such as nursing homes, assisted living or in-home aides. For many people, this kind of care becomes necessary at some point in life. You might reach a time when daily routines become difficult, if not impossible, or you have an emergency and need a nurse.
The problem is that this type of coverage can be pricey. Long-term care at varying levels can cost thousands of dollars per month depending on what care you need and where you live.
Unless you have the cash on hand at the time you need care, it's too late to plan for it. Most health insurance does not cover long-term care, and Medicare doesn't either. Medicaid will, but you must stay below the program's income and wealth caps, which can force retirees to impoverish themselves to qualify.
If you have neither the insurance nor the cash on hand, long-term care can quickly drain your household's resources and put you in a bad spot during a vulnerable time. In fact, some people need to sell their homes and liquidate their retirement accounts to pay for the steep costs of care that they need, but otherwise cannot afford.
This is why long-term care insurance is an important part of retirement planning. Even a modest policy may be able to handle the bulk of your costs, leaving you with manageable bills to pay on the other side.
What Does Long-Term Care Insurance Cost?
So the question is, how much should you pay for long-term care insurance? As an example, if you were quoted $500 per month, is that a reasonable premium to pay? The answer depends on the factors relevant to your individual situation.
Long-term care insurance is priced based on your life expectancy when you buy the policy. This is because, if residential care becomes necessary, you might need it for the rest of your life. As a result, among other factors, some of the most important pricing issues include:
Women generally live longer than men, and as such, are more expensive to cover for lifetime insurance.
Age at Time of Purchase
The younger you are when you first get coverage, the less expensive it will be.
You can buy long-term care insurance either for yourself or for you and your spouse. You may find it’s less expensive to buy bundled insurance than two individual policies.
You can determine how much you want your policy to pay each year in care costs, and whether you want that coverage to increase over time. A 2% policy will keep your coverage growing in line with the Federal Reserve's benchmark inflation rate, and the earlier you buy your policy the more important this will be.
Long-term care insurance is a form of health insurance. As a result, your costs will depend in part on your health and medical history.
Based on the aforementioned 2023 data from the American Association For Long-Term Care Insurance, here are a few representative costs for standard policies. All policies are for those in good health with $165,000 in coverage and 2% annual growth:
Age 55, Single Man: $1,650/year
Age 55, Single Woman: $2,725/year
Age 55, Couple: $3,870/year
Age 60, Single Man: $2,060/year
Age 60, Single Woman: $3,325/year
Age 60, Couple: $4,425/year
Age 65, Single Man: $2,600/year
Age 65, Single Woman: $4,230/year
Age 65, Couple: $5,815/year
As you can see, planning ahead can save a lot of money. You will spend more in the short term, but once in retirement you can potentially save thousands each year by having a policy already in place. Again, women get charged much more than men because insurance companies expect them to live longer.
We can also see the answer to the “is $500 per month too much?” question. Yes, you’d probably be paying too much in this situation. Most mainline policies cost less than $6,000 per year on average. If you are in retirement and paying for two people, it's probably not worth disrupting your coverage for relatively minor savings. Otherwise, start shopping around.
Long-term care insurance is an essential part of retirement planning. How much it costs will depend on several different factors, including who you are covering and the benefits you want, but you can save a lot of money by starting to plan for this early.
If you need help planning for retirement and long-term care, you may find it helpful to speak with a financial advisor. Finding a financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now.
Long-term care is something you’ll likely want to plan ahead for. Check out SmartAsset’s guide to long-term care planning to learn more.
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