A Guide to Long-Term Care Insurance

If you’re wealthy, you’ll be able to afford help in your home or care in an assisted-living facility or a nursing home. If you’re poor, you can turn to Medicaid for nursing homes or aides at home. But if you’re middle class, you’ll have a thorny decision to make: whether to buy long-term care insurance. It’s a more complex decision than for other types of insurance because it’s very difficult to accurately predict your finances or health decades into the future.

What’s the difference between long-term care insurance and medical insurance?

Long-term care insurance is for people who may develop permanent cognitive problems like Alzheimer’s disease or who need help with basic daily tasks like bathing or dressing. It can help pay for personal aides, adult day care, or institutional housing in an assisted-living facility or a nursing home. Medicare does not cover such costs for the chronically ill.

How does it work?

Policies generally pay a set rate per day, week or month — say, up to $1,400 a week for home care aides. Before buying a policy, ask which services it covers and how much it pays out for each kind of care, such as a nursing home, an assisted-living facility, a home personal care service or adult day care. Some policies will pay family members who are providing the care; ask who qualifies as a family member and if the policy pays for their training.

You should check to see if benefits are increased to take inflation into account, and by how much. Ask about the maximum amount the policy will pay out and if the benefits can be shared by a domestic partner or spouse.

How much does it cost?

In 2023, a 60-year-old man buying a $165,000 policy would typically pay about $2,585 annually for a policy that grew at 3 percent a year to take inflation into account, according to a survey by the American Association for Long-Term Care Insurance, a nonprofit that tracks insurance rates. A woman of the same age would pay $4,450 for the same policy because women tend to live longer and are more likely to use it. The higher the inflation adjustment, the more the policy will cost.

If a company has been paying out more than it anticipated, it’s more likely to raise rates. Companies need the approval of your state’s regulators, so you should find out if the insurer is asking the state insurance department to increase rates for the next few years — and if so, by how much — since companies can’t raise premiums without permission. You can find contacts for your state’s insurance department through the National Association of Insurance Commissioners’ directory.