Does Long-Term Care Insurance Improve Estate and Financial Planning?

/// By Aviva Sapers

Estate and financial planning help to ensure a secure and comfortable retirement while also providing for our dependents after we’re gone. While most people focus on retirement savings and investments, too many overlook the financial impact that a long-term illness could have on their retirement funds. The use of long-term care (LTC) insurance can help you mitigate the cost of a potential prolonged illness and should be considered in your overall financial planning.

Three Things You Should Know:

  • The Aging Population: In 2022, the U.S. Census Bureau projects that the number of Americans aged 65 and older will nearly double from 52 million in 2018 to 95 million in 2060.
  • The Chances of Needing Long-Term Care: In 2022, the U.S. Department of Health and Human Services estimates that nearly 70% of people turning 65 will require long-term care services at some point in their lives, and the older we get, the higher the probability becomes.
  • The Cost of Long-Term Care: In 2021, according to the American Council on Aging, the national median cost for a private room in a nursing home was $105,850/year. Home health services cost approximately $54,912/year, while assisted living facilities averaged 51,600/year.

All of these numbers are expected to climb, compounding the need for financial safeguards when the average duration of long-term care is about 3 years[1] and 1 in 7 seniors require LTC for 5+ years[2]. Currently, no national program exists to address the rising costs beyond Medicare—it is largely up to individuals to solve for themselves.

There are different types of LTC insurance options that should be considered as you revisit your estate plan, including stand-alone policies, hybrid products, and life insurance with LTC riders.

Why Long-Term Care Insurance:

  • Protecting Your Assets: LTC insurance can help safeguard your savings, investments, and other assets from the high costs of long-term care—allowing you to use your retirement funds for retirement or to pass on to heirs as planned.
  • Maintaining Independence: LTC insurance can provide greater options for where and how you and your loved ones receive care—allowing you to maintain independence and choice for preferred care.
  • Reducing Financial Burden on Family: LTC insurance can alleviate the financial impact on the family, protecting not just you and your spouse, but also the children and grandchildren who may be entrusted with your care.
  • Peace of Mind: Knowing the LTC insurance is in place can help reduce the stress, uncertainty, and guilt of the changing needs that come with aging.
  • Tax Benefits: In some cases, LTC insurance premiums can be tax-deductible, and the benefits are tax free with a qualified LTC product.

Medicare, the largest payer of long-term care costs, only covers costs for a limited amount of time. The simple fact is that the need for long-term care is likely to cost more than any government program can support at some point in your life. A holistic approach to estate planning should take LTC costs into account, and an array of evolving LTC insurance products can be tailored to fit the needs of your retirement and inheritance goals.

With a little innovation and greater access to these more affordable and flexible products, insurance carriers, advisors, and individuals can work together to rethink how we approach planning for the future and the aging process in this country. If you’re interested in discussing available products and solutions, don’t hesitate to reach out with your specific concerns.

[1] 2021, National Center for Health Statistics: ‘Data Brief on Long-Term Care.’

[2] 2021, US Department of Health and Human Services: ‘Report on Long-Term Care Trends.’