Average cost of long-term care insurance

The high costs associated with long-term care insurance are directly related to the high costs of long-term care services and assisted living communities:

• For the average 55-year-old man, long-term care insurance premiums cost $1,700 per year.
• The estimated cost for long-term care during the last five years of life is $233,000 to  $367,000.
• The average American spends $140,000 on long-term care (out of pocket).

About 70% of people require long-term care at some point in their lives. Considering just how expensive it can be to obtain this level of service – and how important it can be to a senior in need — it’s worth taking a closer look at what it costs to obtain long-term care coverage.

Long-term care insurance costs by age

People who purchase long-term care insurance at a young age when they are in good health — before they have any noted health concerns that may mean they need care sooner — get the most affordable rates.

Average annual premium for long-term care insurance

The monthly rates below are for an initial pool of benefits equal to $164,000 at age 55. The value of benefits at age 85 totals $386,500.

Source: 2020 American Association for Long-Term Care Insurance Price Index

The key here is that the rates focus on health. The best rates are for those with preferred health status, meaning they are in good overall health at the time they reach 65.

When a person has some health issues, long-term insurance rates change significantly. That’s because there is a higher likelihood that the individual will need to use their long-term care insurance sooner.

What other factors affect long-term care insurance costs?

Many factors play a role in the overall costs associated with long-term care coverage, which makes it hard to know what you’ll pay until you ask for a quote. Keep in mind that the costs associated with this type of care range widely. The type of coverage and your location are important variables. Gender, marital status and provider are the other factors that matter most.

Long-term care costs (without insurance)

The median annual cost of a nursing home depends on where you live. In the U.S. the cost ranges from $85,800 per year to as high as $150,000 or more per year in some states, according to AARP. This translates to monthly costs of $7,150 to $12,500. Medicare does not pay for nonmedical long-term care needs.

The annual cost for an assisted living facility is about $51,600, or about $4,300 per month, according to Genworth. The level of care in assisted living is less intensive than in a nursing home, so living at this type of long-term care facility costs less. Still, that’s a hefty price tag for seniors on a budget.

Considering the high cost of long-term care, it’s clear that having a financial tool in place to help cover those costs can prove to be very valuable. That’s where long-term care insurance comes into play.

What’s the alternative?

For a person struggling to maintain their home and meet their daily needs and who cannot afford long-term care, one alternative is to live with family, if possible. However, some seniors feel this could interfere with the lives of their children or other family members.

Another option is Programs of All-Inclusive Care for the Elderly (PACE), a Medicare and Medicaid program available to people over the age of 55. It helps seniors meet care needs outside of a long-term care facility by covering services such as adult day primary care, home care, meals, nursing home care and prescription medication.

Long-term care insurance statistics

Each year, millions of people benefit from different types of senior living options, such as nursing homes or assisted living centers. According to the National Institutes of Health, 1.5 million older adults live in nursing homes, and about 1 million live in assisted living facilities.

About 7.5 million Americans have long-term care insurance.

• The average age for purchasing a long-term care policy is 57.7. The majority of people (55%) buy LTC insurance between the ages of 55 and 65; 27% buy it before 55, and 18% buy it after 66.
• Long-term care insurers paid out $11 billion in claims benefits in 2019. The largest claim was $1,591,862; the smallest claim was $19.
• Medicaid is the largest payer of LTC services, at 57%. The rest comes from government programs, family members and private insurance.
• 7.5 million Americans have some form of long-term care insurance. 54,563 individual LTCI policies were sold in 2019.

Consider, too, that Americans are living longer, which means there’s more time for them to benefit from long-term care. Purchasing a policy could mean that you’ll have a better chance at getting the care you need.

The American Association for Long-Term Care Insurance estimates that 7.5 million Americans have some type of long-term care insurance (as of January 2020). There are about 54 million people over 65 in the United States, according to census data, meaning millions of adults lack coverage for long-term care.

Bottom line

About 7 in 10 adults turning 65 will need long-term care services at some point in their lives, according to the U.S. Department of Health and Human Services. One in 5 will need long-term care support for more than five years.

Given the high cost of long-term care — and the lack of coverage from Medicare and other insurers — it’s important to consider purchasing long-term care insurance. A policy’s daily benefit can be used to cover the costs of an assisted living facility, a nursing home, adult day care or a memory care or home care facility. This allows older adults to get the level of support they need at a more affordable cost.