Long-Term Care Insurance: Is It Worth It?

Authored by: Chris Vidler, CFP® CIMA®

When most people think about their future, they plan for vacations, retirement, or passing wealth to the next generation—but far fewer plan for the possibility of needing long-term care. Long-term care (LTC) refers to a range of services designed to meet a person’s health or personal care needs over an extended period, typically as they age or face chronic illness. These services—whether provided at home, in assisted living, or in a nursing facility—are often not covered by standard health insurance or Medicare.

Yet, despite its potential impact, long-term care insurance remains one of the most misunderstood—and debated—components of a financial plan. Many assume it's unnecessary, too expensive, or something only the very wealthy or very sick should consider. In reality, the decision to insure against long-term care risk is far more nuanced.

At Concentric Wealth Partners, we view this as a critical question in creating your retirement plan. Whether a client chooses to self-insure, purchase standalone coverage, or explore hybrid policies, this decision can significantly affect retirement income strategies, estate planning goals, and overall financial resilience. In this post, we’ll unpack the pros and cons of long-term care insurance to help you make an informed decision for your future.

Understanding Your Long‑Term Care Needs

Long-term care (LTC) refers to a range of services designed to support people who can no longer perform basic activities of daily living, like bathing, dressing, eating, or managing medications. These services can be delivered in various settings: at home through part-time health aides, in community centers offering adult day care, in assisted living facilities that offer residential support, or in full-scale nursing homes that provide 24-hour skilled care. Some facilities also offer memory care units, tailored specifically to people with dementia or Alzheimer’s.

The costs for these services can vary dramatically based on location and level of care. Nationally, the median annual cost for assisted living is over $55,000, while a private room in a nursing home can exceed $130,000 a year. Even in-home care, which many see as the most flexible and preferred option, can run upwards of $60,000 annually if full-time assistance is needed. And these costs are only rising. Labor shortages, inflation, and increasing demand from an aging population are pushing long-term care expenses up faster than the rate of general inflation.

Many people assume that Medicare will cover long-term care costs—but that’s often not the case. Medicare typically covers short-term rehabilitation or skilled nursing under specific circumstances, but not the kind of custodial care most people eventually need. As a result, the financial burden frequently falls on individuals and families.

How likely are you to need care? Statistically, quite likely. About 70% of people turning 65 today will require some form of long-term care in their lifetime. Women are more likely to need care—and for a longer period—partly due to their longer life expectancy. On average, women require about 3.7 years of care, while men need closer to 2.2 years. And the older you get, the greater the probability: more than half of adults over 85 need help with daily living activities.

These statistics highlight why long-term care planning is a critical component of any retirement strategy.

Should You Buy Long-Term Care Insurance—or Self-Fund?

Once you understand how likely long-term care (LTC) is and how expensive it can be, the next question naturally follows: How do I plan for it? Some clients explore traditional insurance policies, while others decide to “self-insure” by setting aside funds. There’s no one-size-fits-all answer—only what fits best with your long-term goals, income strategy, and financial resilience.

The Case for Self-Funding

For high-net-worth households or those with strong projected retirement surpluses, self-insuring may be a perfectly reasonable option. If your financial plan shows that you can absorb a potential LTC event without jeopardizing other goals (like legacy planning, gifting, or maintaining standard of living), then insurance may simply not be necessary.

Clients who lean toward self-funding often do so because they dislike paying premiums for something they may never use. Some also want more flexibility in how their funds are used and resent the “use it or lose it” nature of traditional insurance.

However, self-funding isn’t just about having money—it’s about intentionally preparing for an unpredictable cost. Without a plan, families may end up liquidating investments at the wrong time, disrupting tax strategies, or leaning too heavily on one spouse’s assets. That’s why earmarking funds is key.

Smart strategies for self-funders might include:

• Building a dedicated LTC reserve in a brokerage account or cash-value asset.
• Keeping some fixed-income assets easily accessible in the “income ladder” portion of the retirement portfolio.
• Structuring taxable and tax-free accounts for flexible withdrawals during care years.
• Using income streams from pensions, rental real estate, or required minimum distributions (RMDs) as a cushion.

Exploring Long-Term Care Insurance Options

For clients who want to share the risk—or preserve more of their assets for heirs—insurance may offer peace of mind and financial leverage. Ironically, we see many clients who have the capability to self-fund choose to use insurance because of the leverage that it could create.

There are 2 major types of LTC policies: Traditional (Standalone) and Hybrid or Combo Policies. Traditional LTC Insurance is the most straightforward approach: you pay an annual premium, and if you qualify (usually based on needing help with two or more activities of daily living), the policy pays for covered services up to a daily or monthly limit.

Traditional long-term care insurance typically comes with lower initial premiums than hybrid policies and, when structured correctly, can provide strong inflation protection. However, these policies are not without drawbacks—premiums can rise over time, and if you never require care, the benefits go unused, making it a “use it or lose it” proposition.

In response to the "use it or lose it" nature of traditional long-term care insurance, hybrid or combo policies have grown in popularity as a potentially more appealing option. These policies combine long-term care coverage with either life insurance or an annuity. If care is needed, the policy pays for those services; if it isn’t, the death benefit goes to your heirs. At Concentric Wealth Partners, we often find that hybrid policies offer a compelling alternative to traditional LTC insurance, especially for clients seeking more flexibility and value.

One of the key advantages is that premiums aren’t wasted—someone receives a benefit, whether for care or through the death benefit. Many of these policies also come with fixed or guaranteed premiums, providing predictability over time, and offer flexible payout structures that can be tailored to a client's needs. That said, hybrid policies typically require a larger up-front investment or higher ongoing payments, and if LTC benefits are used, the life insurance payout may be reduced accordingly.

No matter which type of policy you prefer, if you’re comparing policies, make sure you understand:

• Elimination Period: The waiting period before benefits kick in—often 30, 60, or 90 days.
• Benefit Period: How long the policy will pay—some are two years, others offer lifetime coverage.
• Daily/Monthly Benefit: How much the policy pays for care.
• Inflation Protection: Especially critical for those buying in their 50s or 60s, this rider ensures your benefit keeps pace with rising care costs.
• Partnership Status: Some traditional LTC policies qualify for state “partnership” programs, which offer Medicaid asset protection if your benefits run out.

How We Evaluate the Right Path at CWP

At Concentric, we help clients model these scenarios—showing what happens to a retirement plan if a care event occurs. We begin by reviewing each client’s assets, projected retirement surplus, and overall risk tolerance to understand their capacity to self-fund care if needed. From there, we stress-test retirement plans with and without a long-term care event to assess how different scenarios would impact financial goals and legacy intentions. Insurance can play a critical role when it meaningfully enhances the resiliency of the plan—preserving assets, protecting income streams, and reducing the financial burden on family members.

Planning for long-term care isn’t just about protecting against what might go wrong—it’s about making sure your financial plan can support you and your family, no matter what life brings. Unfortunately, many people delay this conversation until it’s too late. That’s why we encourage clients to begin discussing long-term care planning in their early 50s. This timing provides for greater flexibility—especially if insurance is the right fit for managing some of the risk. Waiting too long can lead to rising costs, fewer options, or disqualification due to health issues. Other common missteps include underinsuring—leaving major gaps in coverage—or overpaying for benefits that may not be necessary. And when long-term care planning isn’t aligned with your broader estate or tax strategies, it can create unintended burdens down the road.

Long-term care planning should be fully integrated into your financial plan—not treated as an afterthought. It affects retirement income, legacy goals, and the decisions your loved ones may one day need to make on your behalf. As you consider your options, ask yourself: How would a long-term care event impact my spouse or children? What resources would I rely on? And what trade-offs am I willing—or unwilling—to make?

These are the kinds of questions we’re here to help you answer. If you're ready to explore what long-term care planning looks like within your larger financial picture, we're ready to guide the conversation.

Source:

U.S. Department of Health and Human Services, Administration for Community Living: https://acl.gov/ltc/basic-needs/how-much-care-will-you-need

Genworth 2024 Cost of Care Survey: https://www.genworth.com/aging-and-you/finances/cost-of-care.html

American Association for Long-Term Care Insurance: https://www.aaltci.org/long-term-care-insurance/learning-center/ltcfacts-2024.php

SeniorLiving.org, Nursing Home Cost Guide: https://www.seniorliving.org/nursing-homes/costs/

Journal of Aging Studies: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4195126/

These policies have exclusions and/or limitations. The cost and availability of Long-Term Care Insurance depends on factors such as age, health, and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of Long-Term Care Insurance. Guarantees are based on the claims paying ability of the insurance company. Long-Term Care Insurance or Asset-Based Long-Term Care Insurance products may not be suitable for all investors. Surrender charges may apply for early withdrawals and, if made prior to age 59 ½, may be subject to a 10% federal tax penalty in addition to any gains being taxed as ordinary income. Please consult with a licensed financial professional when considering your insurance options.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Chris Vidler and not necessarily those of Raymond James.

Investing involves risk and you may incur a profit or loss regardless of strategy selected.