Long term care insurance picks up where Medicare Part A leaves off, and can help prevent the type of financial troubles that often accompany long term illness.
More than half of all Americans currently over the age of 65 will require some degree of long term care. Yet many have little by way of savings or insurance. In such cases, the burden typically falls to loved ones, who have financial responsibilities of their own to account for.
It is a difficult situation that can wind up undermining a family’s finances for generations. But it does not have to happen. Long term care insurance is the affordable way to ensure you or your loved one will be properly cared for if the need arises. That way, everyone can rest easy.
The following companies provide the best long term care insurance for 2021.
1. New York Life
New York Life no longer imposes ‘elimination periods’. That is good news for those afraid they might go broke waiting for their long term care insurance to kick in. The My Care umbrella program also provides a wealth of healthcare options.
What we like: We like the relatively low starting point for coverage. The option for spousal protection and the ability to choose set terms or annual review is also a plus. And the partnership with AARP lends a bit more credibility.
Flaws: Their website is not very useful. If you want a quote on any of their policies, you will have to call them.
With a benefit period as long as six years, MassMutual understands that some people require protracted care. You will pay a bit more for the extended benefits, but the peace of mind it can provide will likely be worth it.
What we like: MassMutual is on very strong financial footing. That should be reassuring for those who are still young. They also are one of the few companies that will offer more than three years of coverage.
Flaws: Chances are they will ask you to take a medical exam. Also, if you receive long term care benefits, they will reduce your death benefit payout.
Nationwide is one of the few insurance companies to weather the long term care storm of a decade ago and emerge relatively unscathed. That is a testament to their leadership and financial strength.
What we like: Being able to access some of the death benefit can make things much easier. Should you opt-out of the long term care rider, they will return any premiums paid. The benefit period can also be stretched to seven years.
Flaws: Their requirements to prove you need long term care are relatively strict. And premiums are relatively high.
4. Northwestern Mutual
Long term care insurance from Northwestern Mutual is a no-nonsense product offered at a reasonable price. They offer inflation protection at one of three levels that can help ensure you do not outlive the usefulness of your policy.
What we like: Northwestern Mutual is on rock-solid financial footing. Their long term care plans off inflation protection that can make a huge difference. The company is also easy to work with.
Flaws: They are not the largest insurance company, and they do not operate in all 50 states.
5. Mutual of Omaha
Mutual of Omaha gives you the option of consulting one of their licensed health advisors. That helps you make an informed decision about your coverage. The company also waives the monthly premium as soon as you trigger your benefits.
What we like: We like the inflation protection option. The shared care option is also a potential plus for many couples. They are also one of the few insurance companies licensed to operate in all 50 states.
Flaws: You will not get any help from the company website.
Guardian long term care coverage is offered as a rider to their life insurance products. This way, you are covered for any eventuality. Should you need to, you can access a portion of your death benefit to cover long term care costs.
What we like: Guardian provides a lot of options when it comes to receiving benefits. Also, the company is on solid financial footing. And their customer service is some of the best in an industry not known for it.
Flaws: This is a hybrid policy, so there is no escaping the need to also purchase life insurance.
7. Equitable Long Term Care Rider
Formerly ‘Axa Equitable’ and ‘The Equitable’, and now simply ‘Equitable’, this American subsidiary of the French insurance conglomerate Axa has been around since the mid-19th century.
What we like: The company has been around in one form or another for more than 170 years and is still on sound financial footing. Their life insurance/long term care policies provide a range of benefit options.
Flaws: They offer a rider to their various life insurance policies. Not a stand-alone long term care policy.
OneAmerica offers annuities bundled with long term care coverage, or life insurance with a long term care rider. Both options provide innovative ways to pay your monthly premium, including using your IRA for a one-time payment.
What we like: We appreciate the option of applying the death benefit to long term care expenses. We also like that you can specify the length of long term care benefits. Their shared care option is also a good choice for couples.
Flaws: Like a lot of other companies, OneAmerica no longer offers a price quote app on their website.
Transamerica’s long term care insurance is modest in scope. As a result, premiums are also modest. That makes Transamerica a good choice for those seeking an affordable way to help ensure late in life financial viability.
What we like: Their long term care policies provide myriad forms of protection. We appreciate the zero-day wait for in-home care, and the option to choose relatively minimal protection.
Flaws: As we noted, their total benefit coverage is modest, to say the least. And the customer service could use some improvement.
10. LTC Consumer
Sometimes you do not want to be bothered jumping from website to website. LTC Consumer is a long term care insurance portal that can make finding the right policy a relatively effortless endeavor. Their website is loaded with useful resources.
What we like: While not an insurance company LTC Consumer can simplify the search for good long term care insurance. The companies they work with are all first-rate and on sound financial ground.
Flaws: As we mentioned they are not an insurance company. They are an information clearinghouse.
Who Needs Long Term Care Insurance?
It is estimated that more than half the people currently 65 and older will require some type of long term care (1). That is a disturbing number when you consider that the average nursing home in the US costs upwards of $100,000 a year. And, that the average length of stay in such facilities is three years. The picture does not get any prettier when you consider that nearly 30 percent of people over 55 have no retirement savings and no pension coming to them.
So, when considering the question about who needs long term care insurance, we can start with those millions of 55-year-olds with nothing set aside for old age. They are not the only ones who would benefit from long term care coverage, however. Those with savings who want to spend them on something other than medical bills should also have long term care insurance. And those who want to live out their lives in their home, instead of selling that home to cover long term care costs, should also have this type of coverage.
How We Ranked
20 years ago there were 125 insurance companies in America that sold long term care insurance – often referred to in the industry as LTC insurance. Today there are less than 25. The difference is attributable to an industry crisis that occurred in the early 2000s when many of the people who had bought LTC policies in the 80s and 90s began to require care. Insurers had grossly underestimated their costs, and many lost untold millions before exiting the business.
Our primary concern then, was to only select companies that are on a firm financial footing. We looked at a variety of sites that measure the financial strength of insurance companies, and chose only those companies that received outstanding ratings. We did include a couple of insurance clearinghouses, as long as they too represented companies with solid balance sheets.
The lifetime long term care policy has gone the way of the VCR. Today, the longest policy you will find will be for two or three years. And that is what we wanted to see, given that the average length of long term care is three years. We also included the best hybrid plans that bundle life and LTC insurance and allow the policy holder to withdraw against the death benefit to pay for long term care if necessary.
Finally, we looked for things like inflation protection. Because if you do not plan for inflation, it will undoubtedly come back to haunt you. And we gave extra points to companies that offer waiver of premium provisions that remove the onus of making monthly payments after long term care has commenced.
Long term care insurance can save you money. This is the most obvious reason to choose long term care insurance. According to the government, more than two-thirds of all seniors will require long term care (2). On average, they will need some form of long term care for three years. You can try to save the several hundred thousand dollars needed to pay for that length of care, or you can purchase LTC insurance for a fraction of that amount.
Long term care insurance fills the gaps left by Medicare. Many Americans make the mistake of thinking that Medicare will provide for their healthcare needs when they are old. The fact is, full Medicare hospitalization coverage ends after 60 days, and partial benefits run out after 120 days. Considering that people who need long term coverage typically need it for three years, you can see the magnitude of the potential financial shortfall.
Long term care insurance increases care options. It would be wonderful if everyone who needed long term care was treated equally, regardless of their financial situation. But in our world, things often do not work out that way. The fact is, the better your insurance coverage, the more healthcare options you are likely to have access to. This can make a critical difference in the quality of the care you or your loved one receives.
Long term care insurance frees family members to return to work. Many people prefer to convalesce at home. And while this can be more uplifting to the spirit, it can also become something of a burden on loved ones caring for the sick or injured person. Long term care insurance enables the family to bring in healthcare professionals to care for their loved one. This lessens the impact on family and careers.
Long term care insurance reduces stress on loved ones. With the cost of nursing home care around $100,000 per year (more in some states), children of elderly parents with limited financial means are under enormous stress (3). Long term care insurance can help alleviate that stress. Children know their parents will be cared for, and that care will not come at the expense of anyone losing their home or having to declare bankruptcy.
Long term care insurance lets you keep your assets. It’s not just the children of elderly parents going broke because of long term care costs. More elderly parents than ever are losing assets trying to keep up with the cost of long term care (4). That includes stocks and bonds, artwork, and even their home. By the time they pass on, there is little or nothing left to pass on to their descendants. TLC insurance can prevent this.
Long term care insurance is highly cost-effective. Some people suggest that the best way to prepare for long term care expenses is to save. Nothing could be further from the truth. A person would need to save more than $1,500 per month every month for more than 20 years to have enough to afford the same care they could get for spending less than $200 per month on LTC insurance.
Long term care insurance provides a range of choices. Long term care insurance is not a one-size-fits-all proposition. You have numerous choices regarding the length of the ‘elimination period’, the number of years you are covered, what is covered, and more. You can also choose whether to have a stand-alone LTC insurance policy, or one that is bundled with life insurance and allows you to use some of the death benefit to cover long term care costs.
Long term care insurance plans are flexible. The plans we just mentioned that are bundled with life insurance policies provide a lot of flexibility and can be more cost-effective than stand-alone policies. While the LTC benefits are typically more limited than you will get with a stand-alone policy, they are also more affordable. And you have a number of options regarding how much of your death benefit (if any) you decide to apply to long term care.
Long term care insurance premiums may be tax deductible. This is a little known fact that can make a substantial difference in deciding whether long term care is right for some people (5). As long as the premiums amount to 10 percent of a person’s adjusted gross income, they (the premiums) can be deducted from federal taxes. If a person is self-employed, there is no minimum gross income threshold.
Long term care insurance results in better care. An industry report detailing the effects of LTC insurance determined that people with long term care insurance receive more attention from healthcare providers than those without insurance. They also tend to receive care that is better targeted to their particular needs than people who lack proper coverage. That is not a slight on healthcare providers, it is just the way it is.
Long term care insurance enables seniors to retain physical independence. The possibility of losing everything to pay for long term care hangs over millions of older Americans like a dark cloud. Many fear the only way forward will be to sell their homes and move into an assisted living facility. But with LTC insurance, they can receive high-quality care right in their own home, and retain their independence and dignity.
Long term care insurance enables seniors to retain financial independence. There are a lot of good reasons to never buy a house (6). But not owning a home can come back to haunt people later in life. When it comes to paying for long term care, you have no home to sell. Unless you have a ton of savings, that means you will be dependent on others to pay for your long term care. LTC insurance can remove the specter of financial dependence.
Long term care insurance can protect against inflation. Some policies offer an optional feature that increases the benefit to keep up with inflation. That way, you do not find yourself suffering a financial shortfall because prices have increased 10-fold since you bought the policy. If you are a decade or more from retirement, you will need to consider inflation when buying long term care insurance.
Long term care insurance provides peace of mind. Most people would agree that getting old beats the alternative. Still, old age is often no picnic, either for the aging person or their loved ones. Anything that can be done to relieve as much stress and anxiety as possible should be done. Long term care insurance is one simple way to ensure that your or your loved one’s old age is as stress-free and enjoyable as possible.
Q: What is long term care insurance?
A: Long term care insurance covers expenses related to caring for someone who is seriously ill or injured. That may include anything from in-home recovery from an auto accident or stroke, to end of life care at a nursing home or hospital. Long term care insurance is often used to pick up the financial slack once a person exhausts their Medicare benefits.
Q: Why do I need long term care insurance?
A: You need long term care insurance because Medicare has its limits. If you or a loved one requires months or years of attentive, professional care, it could mean financial ruin if you or they are not properly insured. Nursing homes alone can cost upwards of $100,000 a year. In-home care $60,000 or more. LTC insurance can ensure you or your loved one gets the care you need without bankrupting either of you.
Q: What does long term care insurance cover?
A: In most cases, long term care insurance covers the cost being in a hospital or nursing home. But not everyone receiving long term care is in a medical facility. Some are at home, where they are convalescing from an injury such as a car accident. Such recovery periods can be expensive too. So long term care insurance will cover the cost of visiting nurses, adult day care, 24-hour live-in care (7), home meal deliveries, and more.
Q: What is meant by ‘elimination period’?
A: The elimination period is how much time you have to wait between when you open your claim and when you start to receive benefits. Typically, this waiting period is 90 days. If you choose a shorter elimination period, the policy will cost more. A longer elimination period will result in a less expensive policy.
Q: What factors affect the cost of long term care insurance?
A: Things that will affect the cost of long term care coverage include your age and health status, the total value of the benefit, the policy length and where you live. But perhaps the single biggest factor affecting cost is the insurance company itself. There is a significant difference in the cost of similar policies between one company and the next. So, the best approach is to be patient and shop around.
Q: How much long term care coverage do I need?
A: When long term care coverage was first introduced, you could get a lifetime care policy at a very reasonable rate. Those days are over. The companies still issuing these policies have determined that most people don’t need more than two or three years of coverage. There are still some who will need it for longer than that. But the majority (and you must assume you are in the majority) are okay with two or three years of coverage.
Q: I have Medicare. Why do I need long term care insurance?
A: This is a common question. But it is based on a misunderstanding of Medicare. Medicare Part A will cover most hospitalizations for up to 60 days (8). For days 60 thru 90, you are responsible for $352 per day. For the 30 days after that, you are responsible for $704 per day. After those 30 days have elapsed, you are entirely on your own. That is why you need long term care insurance.
Q: Will the cost of long term care insurance increase every year?
A: A decade ago the insurance industry experienced a rude awakening regarding long term care insurance. They had grossly underestimated their costs. As a result, premiums skyrocketed. In recent years, however, the situation has stabilized, and any premium increases are typically modest in size.
Q: Is the cost of long term care the same everywhere?
A: No. The cost of long term care varies widely depending on the state (9). In some states, it is just a fraction of what it is in other states. Even within a particular state, the cost can vary widely, depending on where the facility is located. Some people use the cost and availability of high-quality care as one determining factor when deciding where to retire to.
Q: How much long term care insurance do I need?
A: The average cost of a nursing home in the US is about $100,000 per year. With some states like New York costing far more than that. The average length of stay for women in nursing homes is about 2 1/2 years. While for men, the average stay is about 1 1/2 years. Based on those numbers, women should have up to $250,000 worth of coverage, and men $150,000. But this amount will vary by state.
Q: What is a ‘hybrid’ long term care insurance policy?
A: Many insurance companies today bundle their long term care insurance with their life insurance products. The amount of long term care is typically modest, which limits exposure for the company. If this modest amount turns out to be insufficient (which it often is), the customer can access part of the death benefit to cover the cost of care. The amount obtained from the life insurance benefit is deducted from the payout when the person dies.
Q: What happens if no one knows I have long term care insurance?
A: This is actually a good question. Sometimes, individuals have been making long term care payments religiously for decades. They are single, or their partner is deceased, and no one else knows they have this insurance. Then they are stricken and unable to communicate. In such a case, the family could wind up paying for long term care when they don’t have to. Always alert a close relative about your long term care insurance.
Q: What is meant by ‘premium waiver’?
A: Some long term care insurance policies have a clause that waives the monthly premium once you begin collecting benefits. Not all companies offer such a waiver. And if they do, it will usually wind up adding a few dollars to your monthly payment. Many, however, feel it is worth it because it eliminates the need to continue making monthly payments at a time when your finances will already be stressed.
Q: What happens if I miss a payment?
A: If you miss a payment, there is a better than even chance the insurance company will cancel your policy. If you think you will only miss one payment you can try to plead your case. But your odds of prevailing are not good. Older individuals with dementia (10) often forget they need to make various payments. Then, when it comes time to use the long term care insurance, the family is stunned to discover the policy was canceled for failure to pay.
Q: Is there a guaranteed acceptance window?
A: Some people are under the impression that long term care insurance is like Medicare supplement insurance. With Medicare supplement insurance you have a six-month window where you cannot be turned down, starting the month you turn 65. This is called your ‘Guaranteed Issue Right’ (11). But that is not the case with long term care insurance. An insurer can reject any applicant for any reason at any time.
Q: When is the right time to get long term care insurance?
A: Because there is no guaranteed of acceptance like there is with Medicare, insurance companies can refuse long term care coverage to anyone. That means that if you wait until you are in your 60s, or until you are ill, you will very likely find it impossible to get long term care insurance. As such, the best time to get long term care insurance is when you are reasonably young and reasonably healthy.
Q: Why is long term care insurance so much more expensive now?
A: When insurance companies first began offering these policies some 30 years ago they miscalculated. As their customers aged and began to file claims, it turned out the cost to the insurers was much greater than they anticipated. Many companies stopped issuing new policies and got out of the business (12). Others doubled or tripled their premiums. And still others began offering long term care insurance only as a rider to life insurance policies.
Q: Can the insurance company cancel my long term care coverage?
A: No, the insurance company cannot cancel your long term care coverage for no reason. However, as we said above, they can cancel your policy if you do not make your payments as agreed. For this reason, you need to be reasonably sure you can afford long term care insurance before you take out a policy. Because if you have a setback and skip a payment, the company will likely cancel your policy, and you will lose every penny you invested in it.
Q: Does a shared benefits policy make sense?
A: A shared benefits policy is one where both partners sign up together for a long term insurance plan. These days that typically means a two-year plan. If one of the partners becomes ill and needs more than two years of care, the other can forego their coverage and transfer it to the sick partner. Thereby providing them with four years of coverage instead of just two. If that sounds like a good idea to you, bring it up with the insurance agent.
Unless you happen to be independently wealthy, long term care insurance makes a lot of sense. It can protect you and your loved ones from financial calamity, and allow everyone to rest easy knowing you will be cared for if the need arises.
Long term care insurance can also fill the significant gaps left by Medicare Part A. Gaps that have been lead countless Americans to substandard care and even bankruptcy court.
You have many options today when selecting a long term care insurance plan. And many cost only a few dollars a day. The companies on the above list survived the LTC troubles of the past decade and emerged as strong, reliable suppliers of this vital product.
For cpoe.org’s #1 recommended long term care insurance, click here.