Key Takeaways
What is long-term care insurance? It’s a policy specifically designed to cover the costs of long-term care services for the policyholder.
Are nursing homes covered by long-term care insurance? In general, most long-term care policies provide coverage for nursing home care.
Discover how long-term care insurance works—and what factors you should consider before buying a policy of your own.
Did you know most older adults will end up needing extra care and support at some point in their later years? Long-term care refers to a variety of health and personal care services provided when someone can no longer perform all daily living tasks on their own. These services are intended to help a person maintain their comfort, safety, and well-being for as long as possible.
There are many settings where long-term care is provided, including nursing homes. While the costs of extended nursing home care can be high, one solution for offsetting these costs is long-term care insurance. In this article, we’ll explore what kind of coverage a long-term care policy provides—and how it can help you financially prepare for your later years.
Understanding long-term care insurance and nursing homes
What is long-term care insurance?
Long-term care (LTC) insurance is an insurance policy that helps pay for the costs of long-term care services and supports if and when you need them. It generally covers skilled nursing care as well as services to assist with bathing, dressing, eating, and other personal care tasks. These services are not usually covered under a traditional health insurance plan.
What is a nursing home?
A nursing home is an institutional setting for people who can no longer live on their own. They do not require hospital care but cannot be cared for at home. While some nursing homes may be set up much like a hospital, others may provide a more home-like environment. Nursing homes have aides on staff as well as registered nurses 24 hours a day.
Services provided at a nursing home include:
- Round-the-clock supervision
- Skilled nursing care
- Three meals a day
- Help with personal care
- Physical, speech, and occupational therapies
Nursing homes are slightly different from skilled nursing facilities, which mostly focus on providing post-hospital rehabilitative care for short-term stays. However, many nursing homes have special wings or floors dedicated to skilled nursing care.
Who qualifies for long-term care insurance?
Nearly any healthy adult age 18 or older can qualify for long-term care insurance. However, an insurer may decline to issue you a policy if you have a serious medical condition (e.g., Parkinson’s disease or Alzheimer’s disease).
Timing matters when it comes to long-term care insurance. Since the majority of long-term care claims are filed after the age of 70, buying a policy between the ages of 50 and 65 is a good rule of thumb.
What nursing home costs are covered by long-term care insurance?
Today, most long-term care policies offer broad coverage that includes care providing in a nursing home. In general, this coverage applies to:
- Room and board
- Skilled nursing care
- Help with personal care
- Therapies as needed
Things to know before buying long-term care insurance
When does long-term care insurance coverage begin?
The terms and conditions of long-term care policies vary. Before you can receive benefits, an insurer will usually require you to meet a set of conditions called benefit triggers. Typically, you must either need help with a certain number of daily living activities, or you have a severe cognitive impairment.
Once benefits are approved, you’ll have to pay all costs out of pocket for 30 to 90 days. After this elimination period is over, the insurer begins reimbursing you for payments based on the terms of your policy.
Long-term care insurance costs
In 2023, the average cost of long-term care insurance was $900 yearly for a 55-year-old man based on $165,000 of coverage. Women, unfortunately, face significantly higher rates. The average premium for a 55-year-old woman was $1,500 a year for comparable benefits.1
Your age, policy coverage limits, and the scope of services covered all have an impact on the cost of a long-term care policy. Health matters, too. If you’re in poor health, you may pay more in premiums or be limited in coverage.
Nursing home costs and payment options
How much do nursing homes cost?
Nursing home costs can differ greatly depending on the geographical location of the facility and the services provided. There are options for the budget- conscious as well as high-end facilities that offer every amenity imaginable.
According to Genworth's Cost of Care Survey, in 2023, the average national cost for a semi-private room in a nursing home was $8,390 per month. A private room averages $9,584 monthly.
Other ways to pay for a nursing home
Even if you don’t have a long-term care policy, you can fund nursing home costs in other ways. Many people use private funds such as retirement savings, employment wages, and pensions. Other options include:
- Medicare: Medicare does not generally pay for all costs of a long-term stay in a nursing home. In some scenarios, Medicare will cover short-term stays in a skilled nursing facility as long as the facility is Medicare-approved and you had a qualifying hospital stay beforehand.
- Medicaid: If you meet eligibility requirements, Medicaid will pay nursing home costs no matter the duration of the stay.
- Veterans’ benefits: If you’re a veteran with benefits through the U.S. Department of Veterans Affairs (VA), you may be able to receive care in a community nursing home as long as you meet certain criteria.
- Reverse mortgages: If you take out a reverse mortgage, you could use these funds to help pay for a nursing home. It’s a good idea to consult a licensed financial counselor beforehand, however.ow
How much long-term care insurance do you need?
No one knows exactly how much long-term care they might need one day. But you can make an informed guess. For example, women tend to need care for an average of 3.7 years, while men need care for less time: an average of 2.2 years. Since location matters as well, use Genworth’s Cost of Care Survey to research average nursing home costs in your area.
Your age, financial situation, and personal and family health history also affect how much care you may need. Another thing to consider is whether you’ll be able to—or want to—rely on family members for support.
Long-term care insurance and nursing homes for people with dementia
Many nursing homes offer memory care units that cater to people with dementia. If you have a family history of dementia and think you may need long-term memory care one day, look for a long-term care policy that specifically covers Alzheimer’s disease and other types of dementia. However, it’s important to buy coverage early, before you receive a dementia diagnosis. Once you're diagnosed, you will likely have difficulty buying long-term care insurance—since most insurers will consider you high risk.
4 tips for choosing the right long-term care insurance
With so many options available, finding the right long-term care policy for you can be challenging. These guidelines can help you choose wisely:
- Review the terms and exclusions of each policy carefully. Get quotes from different carriers so you can compare coverages and costs.
- Make sure the insurer you choose is licensed in your state by reaching out to your state's insurance department.
- Think about what the right amount of insurance is for you based on your health, financial situation, and potential support from family. If your costs end up being beyond your insurance coverage, you will need to pay out of pocket.
- Make sure you can comfortably afford the monthly premium payment. These costs can go up over time.
Frequently asked questions
Can my health insurance policy cover nursing home care?
Traditional health insurance plans and Medicare provide little to no coverage for long-term care costs. However, Medicaid may cover 100% of the cost of nursing home care for qualified beneficiaries.
When is the right time to secure long-term care insurance?
It’s best to enroll in a long-term care insurance policy when you’re young and relatively healthy. Buying a policy after the age of 50 and before the age of 65 is a good practice.
How do I find out if I’m eligible for long-term care insurance?
Every insurer has its own set of requirements. The best way to determine if you qualify for long-term care insurance is to consult with multiple carriers.
Bottom line
Long-term care insurance can provide valuable financial protection should you one day need extra support to meet your daily needs. Talk to an experienced and licensed financial advisor for help in exploring your options and creating a smart plan for your future.
Sources
1. American Association for Long-Term Care Insurance. 2023 Long-Term Care Insurance Price Index Released. March 6, 2023. Found on the internet at https://www.aaltci.org/news/long-term-care-insurance-association-news/2023-long-term-care-insurance-price-index-released
