Financial Basics · Insurance & Protection

Long-Term Care Insurance

Definition

Long-term care (LTC) insurance pays for extended assistance with daily living — nursing homes, assisted living, or in-home care — when you can no longer do 2+ activities of daily living on your own.

Why it matters in retirement

About 70% of people turning 65 will need some form of long-term care. The average nursing home stay costs over $100,000 per year, and Medicare does not cover it. LTC is the single biggest uninsured risk in most retirement plans.

Key Numbers — 2026

Avg private nursing home (2026)
~$116,000/yr
Avg home health aide
~$75,000/yr
% needing some LTC after 65
~70%
Avg LTC claim duration
~3 yrs

Pros

  • Protects assets from catastrophic care costs
  • Preserves spousal standard of living
  • Hybrid policies return value if unused

Cons

  • Traditional premiums can rise dramatically
  • Strict underwriting — apply before 65
  • Claim triggers are strict
  • Policies lapse if premiums go unpaid

Common mistakes

  • Waiting until 70+ to apply (underwriting becomes impossible)
  • Buying more daily benefit than you need instead of longer duration
  • Skipping inflation protection on a policy you'll use in 20 years
  • Assuming Medicare covers long-term care (it doesn't)

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