Long-term care insurance pays for help with daily living when you can no longer do it yourself — whether that's at home, in an assisted living facility, or in a nursing home.

This type of insurance covers the cost of personal care (bathing, dressing, eating) and skilled nursing care when you have a chronic illness, disability, or cognitive decline like dementia. It does not cover regular medical treatment or hospital stays — your health insurance handles those. Instead, it pays for the day-to-day support and supervision you need when you cannot manage alone.

The policy pays a daily or monthly benefit amount directly to you or to the care provider. You choose the benefit amount and how long you want the policy to pay (called the benefit period). Most people buy this insurance in their 50s or 60s, before they need care, because premiums are lower when you are younger and healthier.

Key Takeaways

  • Long-term care insurance reimburses you for custodial care — help with bathing, dressing, meals, and toileting — not for medical treatment or hospital care.
  • You choose the daily benefit amount, the waiting period before coverage starts, and how many years the policy will pay, and these choices directly affect your premium.
  • Most policies require a doctor to certify you cannot perform two or more activities of daily living before the insurance begins paying.
  • Premiums can increase over time, and some policies have built-in inflation protection that raises your benefit amount automatically.
  • Long-term care insurance is optional — you can also self-insure by saving money, or rely on Medicaid if your assets are limited.

What counts as a covered care need

Insurance companies define coverage using activities of daily living (ADLs). These are the basic tasks most people do without help: bathing, dressing, toileting, transferring (moving from bed to chair), continence, and eating. Some policies add grooming and walking as ADLs.

Most policies start paying when a doctor certifies you cannot perform two or more ADLs without help. A few policies require only one ADL, and some add cognitive impairment — meaning you have been diagnosed with Alzheimer's disease, dementia, or a similar condition — as a separate trigger for coverage, even if you can still perform ADLs.

The policy pays whether you receive care at home, in an assisted living community, in an adult day care center, or in a nursing home. Some policies pay a flat daily amount; others reimburse your actual expenses up to the daily limit. Read your policy to know which type you have, because the difference affects what you actually receive.

How to choose a daily benefit amount and waiting period

The daily benefit is what the insurance company pays per day when you are receiving covered care. You choose this amount when you buy the policy. In 2024, typical daily benefits range from $100 to $300, though you can choose higher or lower. The higher your daily benefit, the higher your premium.

The waiting period (or elimination period) is how many days you pay for care yourself before the insurance starts paying. Common waiting periods are 30, 60, or 90 days. A longer waiting period means a lower premium, because the insurance company pays less often. If you have savings you can draw on, a 90-day waiting period can cut your premium significantly.

The benefit period is how long the policy will pay. You can choose 2 years, 3 years, 5 years, or lifetime. A lifetime benefit period costs much more but protects you if you need care for many years. A 3-year period covers the average length of care for most people. Think about your family history and your risk tolerance when choosing.

Understanding inflation protection and premium increases

Long-term care insurance premiums are not fixed. Insurance companies can and do raise rates on existing policies when claims experience is worse than expected. Some states regulate how much rates can increase in a single year, but increases of 10 to 40 percent over several years are not unusual.

Inflation protection is an optional add-on that automatically raises your daily benefit amount each year, usually by 3 or 5 percent. This protects you because care costs rise over time. If you buy a policy at age 55 and do not need care until age 80, your benefit amount will have grown substantially. Inflation protection increases your premium now, but many financial advisors recommend it because care costs are high and rising.

When you receive a rate increase notice, you have the choice to accept the increase, reduce your benefit amount to keep the premium the same, or drop the policy. If you drop it, you lose all coverage and cannot get it back if your health has changed.

When you file a claim

To start receiving benefits, you must have a doctor certify that you meet the policy's definition of needing care — usually that you cannot perform two or more ADLs. You submit this certification to the insurance company along with your claim form. The company reviews the medical evidence and either approves or denies the claim.

Once approved, the insurance company begins paying after your waiting period ends. If you chose a 60-day waiting period, you pay for the first 60 days of care yourself, and the insurance starts paying on day 61. The company typically pays the care provider directly, though some policies pay you and you pay the provider.

Keep records of all care expenses and medical certifications. If the insurance company denies your claim, you will need this documentation to appeal. Some policies have a contestability period (usually two years from purchase) during which the company can deny claims based on misstatements in your process; after that period, they cannot.

Long-term care insurance versus other ways to pay for care

Long-term care insurance is one option, but not the only one. Self-insuring means saving enough money to pay for care yourself. If you have $500,000 in assets and expect to live another 30 years, you might decide to set aside $100,000 for potential care costs and take the risk that you will not need more. This works if you have substantial savings and are comfortable with that risk.

Medicaid is a government program that pays for long-term care if your income and assets fall below your state's limits. You do not need to buy insurance; Medicaid covers nursing home care and some home care. The trade-off is that you must spend down your assets to become may be able to access, and Medicaid pays lower rates than private insurance, which limits your choice of facilities and providers.

Some people buy hybrid policies that combine long-term care insurance with life insurance or an annuity. These policies pay a death benefit if you never need care, so you do not "lose" the premium. They cost more than standalone long-term care insurance but appeal to people who want to may provide some return on their money.

Who should consider buying this insurance

Long-term care insurance makes sense if you have moderate to substantial assets you want to protect, you are in reasonably good health, and you are willing to pay premiums for years before you might need care. If you have less than $100,000 in assets, Medicaid will cover your care once you spend down, so insurance may not be worth the cost. If you have more than $1 million in liquid assets, you might self-insure instead.

Your age matters too. Premiums are much lower if you buy in your 50s than in your 60s or 70s. If you wait until you have a health condition like diabetes or heart disease, you may be denied coverage or charged much higher rates. Some people buy a limited policy (shorter benefit period, lower daily benefit) as a compromise between cost and protection.

Family history is relevant: if multiple relatives needed nursing home care for years, your risk is higher. If your family typically lived independently until death, your risk is lower. Talk to your doctor about your own health trajectory and discuss the decision with your family.

Common mistakes when buying or using this insurance

One mistake is buying a daily benefit that is too low. If you choose a $100 daily benefit but care costs $200 per day, you will pay the difference yourself. Research actual care costs in your area before deciding on a benefit amount.

Another mistake is choosing a waiting period that is too short to afford. If you do not have $5,000 to $10,000 in savings to cover a 90-day waiting period, choose a shorter one. The premium savings are not worth it if you cannot actually pay for care during the waiting period.

A third mistake is not disclosing your full medical history on the process. Insurance companies investigate claims, and if they find you lied about a pre-existing condition, they can deny your claim years later. Be honest with your agent about every health issue, medication, and doctor visit.

Finally, do not assume your policy covers everything. Read the exclusions. Most policies do not cover care related to alcohol or drug abuse, self-inflicted injuries, or care you receive in a hospital (that is covered by health insurance). Know what your policy actually covers before you need it.

Frequently Asked Questions

Can I buy long-term care insurance if I already have a health condition?

Yes, but you may pay higher premiums or face exclusions. Insurance companies underwrite based on your health at the time you explore. If you have diabetes, high blood pressure, or arthritis, you can still buy a policy, but the company may charge more or exclude coverage for care related to that condition. If you have had cancer, a stroke, or dementia, you may be denied entirely. explore while you are healthy if possible.

What happens to my premiums if I never use the insurance?

You do not get the money back. Long-term care insurance is protection against a risk, like car insurance. If you never need care, you have paid premiums for years and received no benefit. Some hybrid policies return a portion of premiums to your heirs if you die without using the care benefit, but standalone policies do not.

Does Medicare cover long-term care?

Medicare covers skilled nursing care for a limited time after a hospital stay, but it does not cover custodial care or long-term residence in a nursing home. Once Medicare coverage ends, you pay out of pocket or use Medicaid if you may have access to. Long-term care insurance fills this gap.

Can I cancel my policy if premiums get too high?

Yes, you can cancel at any time. However, you lose all coverage and cannot get it back if your health has changed. Before canceling, ask your agent whether you can reduce your daily benefit or benefit period to lower the premium instead. That way you keep some protection.

How do I know if a policy is a good deal?

Compare the daily benefit, waiting period, benefit period, and inflation protection across policies from different companies. Get quotes from at least three insurers. Ask about the company's history of rate increases — some companies have raised rates more often than others. Work with an independent agent who represents multiple companies, not just one.