Long - Term Care Insurance

You need long-term care insurance if you have assets between roughly $200,000 and $2 million, excluding your home. Below $200,000, Medicaid will likely cover your care after you spend down your assets.

Start by requesting quotes from three to five insurers when you are 50 to 65 years old—premiums rise 8-10% for every year you wait, and many insurers stop accepting new applicants after age 75 or reject applicants with pre-existing conditions. First, decide your daily benefit amount (typically $100 to $200 per day) and benefit period (three years is common, lifetime is expensive).

You receive benefits when you cannot perform two of six activities of daily living (ADLs)—bathing, dressing, eating, toileting, transferring (moving from bed to chair), and continence—or when you have severe cognitive impairment like dementia requiring substantial supervision. A licensed healthcare practitioner must certify your condition, and your insurer typically requires a care plan from a case manager.

Choose between reimbursement policies (pay what care actually costs, up to your daily limit) and indemnity policies (pay your full daily benefit regardless of actual costs, giving you cash flexibility). Add a shared-care rider if you are married—it creates one pool both spouses draw from, so if one spouse exhausts their three-year benefit but the other used only one year, the second spouse has two years remaining to use.

Can you deduct long-term care insurance premiums on your taxes?

You can deduct qualified long-term care insurance premiums as medical expenses on Schedule A if you itemize, but only the amount exceeding 7.5% of your adjusted gross income. The deductible premium is age-limited: for 2024, individuals 50 or younger can deduct up to $480, ages 51-60 up to $890, ages 61-70 up to $3,570, and over 70 up to $5,960.

What happens if you outlive your benefit period?

Once you exhaust your benefit pool—say, three years of coverage at $150 per day totaling $164,250—the policy stops paying and you pay out of pocket or qualify for Medicaid. Roughly 15% of nursing home residents stay longer than five years, so a three-year policy leaves you exposed if you have a very long care need.

Do most people who buy long-term care insurance actually use it?

Can insurers cancel your long-term care policy?

Insurers cannot cancel your policy as long as you pay premiums, even if your health declines, but they can raise premiums on your entire policy class (all customers who bought the same type of policy). You can reduce benefits to lower your premium if rates increase, or you can let the policy lapse, losing all prior payments.