How to Determine If Long-Term Care (LTC) Insurance is Right for You?
Approximately 70% of adults who survive to age 65 will need long-term care services, and 48% will receive some paid care over their lifetimes, according to statistics from the U.S. Health and Human Services. If you or a loved one winds up in this situation, a long-term care (LTC) insurance policy can help cover the cost.
Here are the essentials to help determine whether LTC insurance is right for your situation and, if so, what coverage options and tax advantages are available.
The Basics
Senior care can be expensive. LTC insurance is intended to cover services that aren’t paid by your regular health insurance policy or Medicare. Most LTC policies will reimburse you for eligible care received in your home, an assisted living facility or a nursing home.
How Much Does Long-Term Senior Care Cost?
The cost of senior care can be high, especially when outside providers are involved. Consider the following types of services:
In-home care. For 2025, you can expect a national median cost of $33 per hour for nonmedical in-home care. This equates to an annual cost of about $48,000 based on four hours per day of service. Depending on the state, median costs range from about $24 to $43 per hour. Those figures equate to about $35,000 to $63,000 annually, based on four hours per day.
How many hours of care will you or your loved one realistically need each week? The answer varies. Relatively healthy, independent seniors may receive their needed care from a few short weekly visits. Seven hours per week is typically the minimum requirement for home care agencies. Housework, companionship, meal preparation and light housekeeping can be accomplished in this time.
A daily visit of two to three hours could be enough to help with grooming, dressing and preparing meals for seniors who need more care but are mobile and not cognitively impaired. About 30 hours per week may be appropriate for seniors who also need daily companionship. Up to 44 hours per week may be appropriate for seniors who need help with multiple tasks, including dressing, toileting, bathing and eating.
Assisted living communities. Assisted living facilities provide housing in a group-living setting for those who can’t (or choose not to) live independently. The cost for a basic assisted living package generally includes:
- An apartment,
- Three meals per day,
- Housekeeping,
- Laundry, and
- Arranged activities, such as grocery store and restaurant trips, bingo, card games, movies, lectures, religious services and occasional day trips.
Residents pay extra for additional services, including help with dressing and grooming, showers, toileting, prescription drug administration, and wheelchair assistance to move around the facility.
Realistically, an assisted living apartment for one person with no extra services is likely to cost at least $3,500 per month and possibly much more depending on the location, the facility and the apartment type.
Nursing homes. Compared to assisted living communities, these facilities provide many more services, including around-the-clock nursing and medical care. Therefore, they can be much more expensive. Nursing homes may also be called skilled nursing or convalescent care facilities. While seniors usually transition into nursing homes permanently, some homes also allow short-term stays for rehabilitation after an injury, illness or surgery. For 2025, the median annual cost for a semi-private nursing home room in the United States is about $115,000 or $132,000 for a private room.
When buying an LTC policy, you must fill out an application and answer health questions. You also may be asked to provide medical records and undergo an in-person or phone interview. Then you’ll need to choose your preferred level of coverage. In general, LTC policies cap the amount paid per day and during your lifetime. After your policy is issued, you’ll begin paying premiums.
Important: Your overall health must be reasonably good when you apply for coverage. Otherwise, you generally won’t be accepted regardless of your age. After you obtain coverage, it will remain in force — regardless of changes in health and advancing age — if you pay the premiums.
Benefits Eligibility
For most policies, the covered individual becomes eligible for benefits when he or she is unable to independently perform at least two of the following six activities of daily living:
- Eating,
- Dressing,
- Bathing,
- Caring for incontinence,
- Toileting, and
- Transferring (getting in or out of a bed or chair).
When the eligibility requirements are met, the insurance provider will review medical documents and possibly send a nurse or other examiner to perform an evaluation. The insurer must approve the plan of care before paying benefits.
Under most policies, you’ll have to pay for services out of pocket for a specified “elimination” period — typically 30, 60 or 90 days — before the insurer will start reimbursing you. Most policies then pay up to a daily limit for care until you reach the specified lifetime maximum.
Benefit Payouts
LTC insurance benefits vary based on the terms of your policy. Usually, benefits are stated as daily maximums, and you’re reimbursed for the number of days of care and the daily cost up to the limit specified by your policy. Alternatively, some policies prescribe a monthly maximum benefit, providing reimbursement for a stated monthly amount, regardless of how many days you receive care or the daily cost.
These days, LTC insurance companies usually limit benefit payments to three to five years. Benefits may also be subject to a lifetime limit. For example, a policy might pay up to a total of $165,000 (with specified annual percentage increases to account for inflation) for eligible care. You or your family will be responsible for any costs that exceed the applicable lifetime limit.
In addition, some LTC policies provide automatic annual inflation adjustments to the daily, monthly or lifetime benefit maximums. Usually, the annual inflation adjustment rate is 3% to 5%, which may or may not be compounded annually. An inflation adjustment feature increases the premium cost, but it can provide a hedge against the rising cost of long-term care and reduce out-of-pocket costs down the road.
LTC Insurance Premiums
The costs of LTC coverage vary depending on the insurance company, so it pays to shop around. In general, premiums are based on the following factors at the time of enrollment:
Age. Obviously, the older you are, the higher your quote from the LTC insurance provider will likely be. Most people buy LTC coverage while in their 50s or 60s. Waiting until you actually need long-term care to buy insurance coverage may not be an option because most policies won’t cover certain pre-existing conditions or approve coverage for people over 75.
Health. Healthy individuals usually pay less for LTC coverage than those in poor health or with high health risk factors (such as drug usage or obesity).
Location. Local care costs vary based on the cost of living, the availability of caregivers and the demand for services. For example, premiums tend to be lower in the Southeast and higher in the Northeast. However, regional costs can differ significantly, even within the same state.
Gender. Women typically pay more than men for LTC insurance, because they live longer on average and, therefore, have a greater chance of making LTC insurance claims.
Marital status. Single individuals tend to pay higher premiums than married people.
Policy terms. You’ll pay more for more generous coverage, such as higher daily and lifetime benefit limits, higher annual inflation adjustments, shorter elimination periods, and fewer restrictions on covered care.
While lower benefits translate into lower premiums, don’t focus too much on cost savings. Senior care can be expensive, and inadequate coverage can be a costly mistake.
Important: While the LTC insurer can’t increase your premium for changes in your age or health, it can raise premiums for broad policyholder classes due to the company’s poor financial results. Always check the overall reputation and premium-raising history of any company you’re considering for LTC coverage.
Tax Angles for LTC Insurance Benefits
The general rule is that benefit payments received under a qualified long-term care policy are federal-income-tax-free. For this purpose, the term “qualified” refers to an LTC policy offered by an insurance company licensed in your state. Qualified policies must be guaranteed renewable and can’t have any cash value. Most currently offered LTC policies are qualified policies but double-check before signing up if you want to collect the tax advantages.
Some qualified policies pay a designated daily benefit, regardless of actual costs. For 2025, benefits under such per-diem policies are automatically tax-free, up to $420 per day. When benefit payments exceed the cap, they’re still tax-free if your actual costs for qualified LTC services don’t exceed the payments.
To illustrate, suppose your LTC policy pays $500 per day regardless of actual expenses. You’ll report no taxable income from the benefit payments if your actual expenses are $500 or more. However, if your actual expenses are only $300 per day, you’ll report taxable income of $80 per day ($500 minus $420, which is the maximum tax-free per-diem benefit for 2025). Note that daily benefit payments are automatically tax-free if the insured person is considered to be terminally ill.
If you collect LTC insurance benefits during the year, the total amount will be reported to you on Form 1099-LTC, “Long-Term Care and Accelerated Death Benefits.” You’ll receive this form early in the following year. The IRS gets a copy, too. Your tax advisor can help you calculate the taxable amount of your benefits and file the appropriate tax forms.
Deductions for LTC Insurance Premiums
A qualified LTC policy is considered health insurance for federal income tax purposes. So, the premiums are treated as itemizable medical expenses. However, if your premiums exceed the annual age-based caps listed below, you can only count the capped amount as a medical expense.
2025 LTC Premium Cap for Deductible Medical Expenses
Age on December 31, 2025 Amount You Can Treat as Medical Expense
40 or under $480
41–50 $900
51–60 $1,800
61–70 $4,810
Over 70 $6,020
Add your qualified LTC insurance premium amount (limited to the age-based cap if applicable) to your other medical expenses for the tax year. If the resulting total exceeds 7.5% of your adjusted gross income (AGI), you can write off the excess as an itemized medical expense deduction. This assumes you have enough other deductions to itemize rather than take the standard deduction.
AGI includes all taxable income items and is reduced by certain write-offs, such as deductible IRA contributions and alimony payments required by a pre-2019 divorce agreement.
Don’t forget to count premiums paid for coverage on your spouse and any other dependent relative. For this purpose, a dependent relative is someone for whom you pay over half the cost of support during the year.
Important: If you’re self-employed, you can generally deduct premiums for qualified LTC insurance whether you itemize or not. However, the age-based deduction cap applies.
For More Information
LTC insurance can provide much-needed peace of mind that you or a loved one won’t become a financial burden on your family. LTC insurance premiums and benefits can also be eligible for favorable tax treatment. Contact your tax advisor with questions about LTC insurance and its tax implications.
Copyright 2025
This article appeared in Walz Group’s June 23, 2025 issue of The Bottom Line e-newsletter, produced by TopLine Content Marketing. This content is for informational purposes only.
