How to Decide If You Need Long-Term Care Insurance

Learn when long-term care insurance makes sense based on your assets, family situation, and age.

  1. Calculate your asset sweet spot. Count your total assets minus your home equity. If you have less than $100,000, Medicaid will likely cover long-term care after you spend down assets. If you have more than $2 million, you can probably afford to pay out of pocket at $60,000-$120,000 per year for care. The $100,000-$2 million range is where insurance makes the most financial sense.
  2. Assess your family care situation. Consider whether family members can realistically provide care. Adult children with demanding careers, health issues, or geographic distance may not be viable caregivers. Spouses over 70 often cannot physically assist with daily care needs. If family care isn't realistic, insurance becomes more valuable regardless of your asset level.
  3. Compare costs at your current age. Premiums increase dramatically with age. A healthy 55-year-old might pay $1,500-$2,500 annually for basic coverage, while a 65-year-old pays $3,000-$5,000 for the same policy. Apply before age 60 if you're considering coverage — waiting until your 70s often makes premiums prohibitively expensive relative to the benefit.
  4. Choose between traditional and hybrid policies. Traditional long-term care insurance offers the lowest premiums but you lose money if you never need care. Hybrid life insurance or annuity policies with long-term care riders cost 2-3 times more but return value to beneficiaries if unused. Hybrid makes sense if you want coverage but worry about losing premium dollars.
  5. Test the premium sustainability. Apply the 10% rule: your annual premium should not exceed 10% of your current income. Insurance companies can raise premiums on existing policies, sometimes by 20-40%. If you cannot afford a 30% premium increase without financial stress, choose a lower benefit amount or skip coverage entirely.
  6. Consider partial self-insurance. Buy a shorter benefit period like 2-3 years instead of lifetime coverage to cut premiums in half. Most care episodes last under 3 years, and you can plan to self-pay beyond that point. This strategy works well if you have $500,000+ in assets but want to protect against catastrophic costs in early years of care.