Pros and Cons of Long-Term Care Insurance

Long-term care insurance policy comes in various forms. The basic plan will only offer a few thousand dollars of lifetime coverage to cover a few hours a day. In contrast, extensive policies provide several hundred thousand dollars to cover an extended stay in a nursing home or residential facility.

However, committing to long-term insurance is one of the most challenging decisions. According to American Association for Long-Term Care Insurance (AALTCI), 50% of people who get insurance at age 65 use its benefits while the other 50% don’t use it.

Experts are also not unanimous regarding this final decision. Many say that it is a poor investment and others believe that a carefully chosen policy can bring many financial benefits.

Therefore, it is better to consider the pros and cons of buying long-term care insurance before making any decision.

What is Long-Term Care Insurance?


Long-term care insurance covers the elderly. It is meant to provide the necessary personal care and wellness when a person reaches old age or encounters a health condition that needs assistance in activities of daily life (ADLs).

Some of the activities that you can manage with the help of long-term insurance include bathing, dressing, using the toilet, taking medications, eating, cooking, laundry, housework, transport to a bed or chair, using communication devices, etc.

Pros of Long-Term Care Insurance

Less financial burden on family

Many families struggle to arrange long-term care, which can be very stressful. Long-term insurance helps families lessen at least half of the expenses.

Protects your retirement savings 

If you have retirement savings to cover your retirement expenses and need long-term care, it will quickly eat all of your savings. Having long-term insurance can protect your savings by sharing the financial burden.

It never expires

The long-term care policy doesn’t expire. It is active as long as you pay the premiums, irrespective of your age or health condition.

It’s worthwhile

If you can evaluate that you will need long-term care in the future, then it would make sense to take long-term care insurance. Additionally, staying out of financial stresses at old age provides peace of mind.

Tax-Free benefits

Long-term care insurance benefits are tax-free, so you don’t have to withdraw money from taxable retirement accounts to pay for the premiums.

Affordable premiums 

The average long-term care insurance premium in 2020 is $2845 /year/ person, whereas the annual cost of care is $102,000/person.

If we look at an annual premium cost and the annual cost of care, it becomes clear that long-term insurance is quite affordable.

➡LEARN MORE: List of Worst Long-Term Care Insurance Companies

Cons of Long-Term Care Insurance

Hard to figure out the insurance amount you need

It can be difficult to estimate the extent of benefits that you may need later. The insurance policy pays a fixed amount, and that too, in some cases. So, you will not get benefits in every situation. Also, your plan may not be sufficient for you, or you may choose more benefits that you never use later in life.

Rates may increase

You can never be assured that insurance companies will keep the rates the same, and there have been cases when insurance companies raised insurance rates.

Benefits may never be needed

You may not get ill or need any assistance, or you may die and never use that long-term insurance care.

Insurance companies may “Go under”

You may pay for 20-30 years, and when you need that money, the insurance company has no way around it. Therefore, before buying insurance, you must look for the financial strength and stability of the company.