Traditional Long-Term Care Insurance

Traditional long-term care insurance covers the costs associated with long-term care services while ensuring your retirement savings aren’t depleted by long-term care expenses. Understand what traditional long-term care policies offer, from in-home assistance to full-time support in a facility, to determine if it’s right for you.

Headshot of Jennifer Schell, writer for Annuity.org
  • Written By
    Jennifer Schell, CAS®

    Jennifer Schell, CAS®

    Financial Writer, Certified Annuity Specialist®

    Jennifer Schell is a professional writer focused on demystifying annuities and other financial topics including banking, financial advising and insurance. She is proud to be a member of the National Association for Fixed Annuities (NAFA) as well as the National Association of Insurance and Financial Advisors (NAIFA).

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  • Edited By
    Savannah Pittle
    Headshot of Savannah Pittle, senior editor for Annuity.org

    Savannah Pittle

    Senior Financial Editor

    Savannah Pittle is an accomplished writer, editor and content marketer. She joined Annuity.org as a financial editor in 2021 and uses her passion for educating readers on complex topics to guide visitors toward the path of financial literacy.

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  • Financially Reviewed By
    Daniel J. Adams, MBA, CFP®, CLU®
    Daniel J Adams, Annuity.org reviewer

    Daniel J. Adams, MBA, CFP®, CLU®

    Founder and President of CEG Life Insurance Services

    As the founder of CEG Life Insurance Services, Daniel J. Adams has extensive experience with life and health insurance products. Daniel assists clients in building a secure financial future as a Certified Financial Planner™ professional and independent insurance agent. He also trains new agents and advises other financial professionals.

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  • Updated: May 29, 2024
  • 5 min read time
  • This page features 5 Cited Research Articles

Key Takeaways

  • Medicare does not cover long-term care support and services, only medical necessities.
  • Traditional long-term care insurance will cover the cost of long-term care services, whether delivered at home or elsewhere.
  • Monthly costs for long-term care can range from $1,700 to almost $10,000. Traditional long-term care policies can help ensure your retirement savings last.

What Is Traditional Long-Term Care Insurance?

Traditional long-term care insurance is a straightforward insurance policy that covers long-term care expenses. It is somewhat similar to car insurance in the sense that you pay a regular premium that might increase over time, but if you do not require its services, you have no claim on any benefits.

Americans over 65 are 70% likely to need some form of long-term care, with most needing three years or more, according to a report from the Administration for Community Living. Family and other unpaid caregivers cannot always adequately support that need, and Medicare does not cover long-term care services. That’s where long-term care insurance comes in.

The length and ultimate cost of long-term care will vary greatly depending on the services you need. Long-term care insurance can keep you from running through your retirement savings to pay for them. It’s important to understand the kinds of services and support traditional long-term care insurance offers, what it can cost and the tax implications.

As both the simplest and lowest cost type of long-term care insurance, a traditional long-term care insurance policy is one of the best ways to protect yourself, your family, and your assets against the significant likelihood that you will need long-term care services.

Coverage Benefits

Long-term care is comprised of a whole suite of services to assist you in the daily acts of living, such as eating, dressing and bathing, as well as home assistance services like shopping and meal preparation. These services can be provided to you in your own home or at an adult daycare services center. You could also receive them in a nursing home or a facility that offers short-stay respite care.

Traditional long-term care insurance can provide you with flexibility and control when it comes to choosing your care options. For example, depending on the policy you choose, your traditional long-term care insurance might also cover professional nursing services, physical or occupational therapy, hospice care and more.

Costs

Traditional long-term care insurance can help you protect your retirement assets and prevent financial hardship, but it does come with a cost. Like other types of insurance, you will pay a monthly premium, which may rise over time. 

Your age, gender, health history and marital status will all impact the cost of your premium. Women, who typically live longer, pay more than men for the same coverage. Some insurance providers offer lower rates to couples who bundle policies together or to those who pay in a lump sum rather than monthly.

2024 Average Annual Premium of a Traditional LTC Policy with $165,000 Coverage

Age Men Women
55 years old $950 $1,500
60 years old $1,200 $1,900
65 years old $1,700 $2,700
Source: American Association for Long-Term Care Insurance

The combined average for couples is $2,080 at 55, $2,600 at 60, and $3,750 at 65.

Tax Implications

Long-term care insurance premiums can be tax deductible. If you are self-employed or own a business, you can claim tax deductions when you purchase your insurance. 

The older you are, the more you can deduct. If you’re between 51 to 60, you can deduct up to $1,760. If you’re 61 to 70, you can deduct up to $4,710. At 71 and over, you can deduct $5,880. Check with a tax professional for the details of your policy and tax situation.

Pros and Cons of Traditional Long-Term Care Insurance

Like all insurance policies, traditional long-term care insurance has advantages and disadvantages. There are other types of long-term care insurance that might better suit your needs. 

Pros and Cons of Traditional Long-Term Care Insurance

  Pros Cons
Traditional Long-Term Care Insurance
  • Policies are straightforward and flexible, so you can choose the amount and types of services 
  • Designed to protect your comfort and keep your retirement savings from being depleted
  • Cheaper than other types of long-term care insurance
  • Harder to find than other types of long-term care insurance 
  • Operates on a use-it-or-lose-it basis, so if you do not need long-term care, you realize no benefit for the premiums you paid
  • Premiums might rise over time

Traditional Long-Term Care Insurance vs. Hybrid Long-Term Care Insurance

Hybrid long-term care insurance builds a cash value, as well as covers the costs of long-term care services. So, if you don’t need long-term care services, you can pass the cash value along to your beneficiaries. Traditional long-term care insurance policies are less expensive than hybrid policies and are generally less complex.

Both types protect your retirement savings from the potential costs of long-term care services and support. But the risk with a traditional policy is that you might derive no further benefit from it other than peace of mind.

Is Traditional Long-Term Care Insurance Right For You?

Needing long-term care in your later years is increasingly a fact of life. Whether you’re temporarily recovering from an accident or illness, or you’re simply unable to care for yourself independently anymore, most Americans will require some form of long-term care support or service after 65. 

Without insurance, long-term care can be expensive. The average monthly cost of care can range from $1,733 for adult daycare assistance to $9,584 for a private room in a nursing home. And those costs will increase with time.

Traditional long-term care insurance might be right for you if you want to ensure your savings last throughout your retirement. 

Talk to an insurance professional about your options to be sure you’re getting the choices and coverage most appropriate for your circumstances.

FAQs About Traditional Long-Term Care Insurance

How does traditional long-term care insurance work?

Traditional long-term care insurance works similarly to car insurance — you pay a regular monthly premium but only submit a claim if you require its services.

How does traditional long-term care insurance differ from hybrid long-term care insurance?

Traditional long-term care insurance covers only the cost of long-term care support and services. Hybrid policies, which are more expensive, build a cash value and have a death benefit that you can pass along to your beneficiaries.

What are important considerations when choosing the right policy?

Every individual’s needs will vary. Do you simply want to cover any long-term care costs, or do you want to leave a financial legacy for your beneficiaries? Your family health history will also provide insight into the kind of coverage you need. Be sure to discuss your needs with a qualified insurance professional.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: May 29, 2024