It’s a simple fact that your needs change as you age, necessitating adjustments in everything from your fitness routine to your home’s layout.

And one such area that may need to be revisited is your insurance. While Medicare and traditional health insurance often help with acute medical expenses and short-term care for certain conditions, they don’t generally cover the price of the ongoing, long-term care you may one day require for daily living.

That’s where long-term care insurance comes in. It’s never too soon to start thinking about what you may need later in life, and this guide can help you better understand the ins and outs of these policies along with some of the upsides of getting one.

What is long-term care insurance?

According to the Administration for Community Living, people sixty-five and older have a 70 percent chance of requiring long-term care at some point due to a chronic condition, a disability, or simply the natural aging process. Such care involves assistance with daily tasks like bathing, dressing, eating, and getting in and out of bed. On average, women need 3.7 years of long-term care because of their higher life expectancy, whereas men typically need 2.2 years.

Naturally, this level of aid comes with additional expenses, which long-term care insurance is designed to help cover. With it, policyholders can receive the support they need in various settings, including at home, in an assisted living facility, in a nursing home, or at an adult day care facility.

One important thing to note is that while Medicaid and Medicare provide coverage for a wide variety of medical expenses, long-term care won’t necessarily fall under that umbrella. In fact, Medicare does not generally pay for any long-term care since it’s often not considered medical care. Medicaid, meanwhile, may cover associated costs, but you have to meet certain income and asset requirements; you may also only be able to select a facility that takes Medicaid. With long-term care insurance, however, you can pick whatever option works best for you and your needs, making it a valuable asset to help safeguard your future health.

The basics

Generally speaking, you’re eligible to start receiving benefits from your long-term care insurance when you’re unable to perform two or more activities of daily living (ADLs), such as eating and bathing, on your own. First, though, you’ll have to get through the elimination period, during which you must pay for your care out of pocket; this can last thirty, sixty, or ninety days depending on your policy.

Your insurance will then cover either a set daily or monthly amount until you reach your lifetime maximum, the most common being $165,000. This means you may still pay for some of your care yourself if the costs are more than your selected coverage. The parameters may also vary from policy to policy, with some having a set duration instead of a lifetime maximum and others offering a preset daily cash amount regardless of whether you receive care that day.

As with other insurance policies, you’ll pay more for certain benefits, including a shorter elimination period or cost-of-living adjustments, which can provide valuable inflation protection for the future. Additionally, your age and health at the time of purchase can impact your premium rates—making it all the more important to look into this option sooner rather than later.

The benefits

While it’s not a guarantee that you’ll require long-term care, it’s worth considering how the out-of-pocket price of this level of assistance compares to that of an insurance policy. Take a private room in a nursing home. The average monthly cost in 2023 was $9,733—that’s $116,796 a year! Even if you have a solid amount saved in retirement and other assets, that expense can quickly drain your funds, putting an excess burden on yourself and your loved ones.

In comparison, according to data from the American Association for Long-Term Care Insurance, a fifty-five-year-old man paid an average of $900 total in 2023 for long-term care insurance, with a woman of the same age paying $1,500. While that certainty isn’t cheap, it’s by far less expensive than the care itself. In this way, insurance can save you a considerable amount each year, which may better protect your assets and help ensure that you still have enough to provide for your other needs as well as for anyone else who may depend on you.

Beyond the financial benefit, having a policy in place can provide significant peace of mind for you and your loved ones should your health worsen down the road. For one, it enables you to better prepare for the future without the constant worry of how you will pay for your care. Even more, it can help guarantee that professional assistance will be available, should it be necessary, allowing your family to focus on supporting you rather than needing to act as primary caregivers.

Long-term care insurance is a critical component of financial planning. By understanding what it is and recognizing its importance, you can make an informed decision that can help protect your future and provide additional care options for whatever may come. As always, it’s important to connect with a qualified insurance professional to discuss your options and determine if this type of coverage is right for you.