Is Long-Term Care Insurance Worth It? How to Decide

How traditional long-term care insurance works

A traditional policy pays a daily amount, up to a limit you choose, for help with activities of daily living such as bathing, dressing or eating, at home, in assisted living or in a nursing home (ACL, LongTermCare.gov, What is Long-term Care Insurance?, last modified February 18, 2020). Your premium depends on your age when you buy, the daily maximum, the number of years the policy will pay, and options such as inflation protection (same source). Most individual policies require medical underwriting, so people already in poor health may not qualify (same source).

Benefits usually start when a nurse or social worker assessment finds you need help with two or more of six activities of daily living, or you have a cognitive impairment (ACL, LongTermCare.gov, Receiving Long-Term Care Insurance Benefits, last modified February 18, 2020). For a tax-qualified policy, a licensed health care practitioner must certify that you cannot do at least 2 activities of daily living for at least 90 days, or that you need substantial supervision because of severe cognitive impairment (26 U.S.C. 7702B(c)(2), checked October 14, 2026).

The four choices that set the price and the payout

• Daily benefit. Compare it with local prices. The 2025 national median was $355 a day for a private nursing home room and $204 a day for assisted living (CareScout Cost of Care Survey 2025, data tables dated March 2, 2026).
• Benefit period or pool. The daily maximum times the number of days sets the most the policy will ever pay (ACL, LongTermCare.gov, What is Long-term Care Insurance?, last modified February 18, 2020). Some policies pay for two to five years, a few for life (same source).
• Elimination period. The waiting time after you qualify before the policy pays, like a deductible measured in days; most policies let you choose 30, 60 or 90 days (ACL, LongTermCare.gov, Receiving Long-Term Care Insurance Benefits, last modified February 18, 2020). Some count only days on which you receive paid care (same source). Ask whether yours counts calendar days or service days: if a caregiver comes three days a week, a 90-service-day wait can stretch to about 30 weeks (hypothetical: 90 days / 3 days a week = 30 weeks).
• Inflation protection. Without it, a daily benefit bought at 60 buys less every year. Compound protection grows the benefit faster than simple protection; ask what each option adds to the premium.

Premiums can go up

A policy has a set premium, but if the assumptions used to price it prove wrong, the insurer can raise premiums (ACL, LongTermCare.gov, Long-Term Care Insurance Costs, last modified February 18, 2020). The federal guide advises asking for the company's premium rate history before you buy (ACL, LongTermCare.gov, What is Long-term Care Insurance?, last modified February 18, 2020).

For many owners this is the biggest risk. A rate increase late in life leaves three hard choices: pay more, cut benefits, or drop coverage you have paid into for years. Before you buy, ask what options the company offers if rates rise, such as a smaller daily benefit at the same premium, and whether you could afford a sizable increase. Your state insurance department is a neutral place to ask what rate increase requests it has seen on the policy form you are considering.

Partnership policies and Medicaid

States can run a long-term care partnership program with Medicaid. Under federal law, a qualified partnership lets Medicaid disregard assets equal to the benefits a partnership policy has paid (42 U.S.C. 1396p(b)(1)(C), checked October 14, 2026). In plain terms, and as a hypothetical: if a partnership policy paid $200,000 in benefits, about $200,000 of assets could be disregarded if you later apply for Medicaid, under your state's rules.

Partnership policies must include compound annual inflation protection if bought before age 61, some inflation protection from 61 to 75, and may include it at 76 or older (same statute). Ask your state insurance department or Medicaid office whether your state has a partnership program and whether a policy qualifies. See also the Medicaid spend-down and estate recovery rules.

Taxes on premiums and benefits

Premiums for a tax-qualified policy count as medical expenses up to an age-based limit. For 2026 the limits are $500 at 40 or under, $930 at 41 to 50, $1,860 at 51 to 60, $4,960 at 61 to 70 and $6,200 over 70 (IRS Rev. Proc. 2025-32, 2026 tax year amounts, checked October 14, 2026). Medical expenses help only if you itemize, and only the amount above 7.5% of adjusted gross income is deductible (IRS, Topic 502, Medical and Dental Expenses, checked October 14, 2026).

Benefits from a qualified policy are generally tax-free. For per diem payments, the 2026 limit is $430 a day (IRS Rev. Proc. 2025-32, 2026 tax year amounts, checked October 14, 2026); amounts above the greater of that limit or your actual care costs can be taxable (26 U.S.C. 7702B(d)). A tax professional can tell you how this applies to you.

When it can make sense

Traditional coverage can fit people with savings large enough to protect but not large enough to pay for several years of care comfortably, often a couple who wants to keep money for the spouse at home. It fits better for people who are healthy enough to qualify, buy while younger and healthier, and could absorb premium increases. It fits worse for people whose savings would cover a long stay anyway, and for people who could not keep paying if premiums rose. If you dislike paying for coverage you may never use, read hybrid long-term care insurance, which trades a higher upfront cost for a death benefit or cash value. To size the risk, start with how much long-term care costs in your state.

A plain example: a $200 daily benefit against real costs

Hypothetical: a 60-year-old buys a policy with a $200 daily benefit, a 3-year benefit period and a 90-day elimination period. The pool is $200 x 365 x 3 = $219,000. Care is priced at the 2025 national private nursing home room median of $355 a day (CareScout Cost of Care Survey 2025, data tables dated March 2, 2026), and care costs are assumed, hypothetically, to grow 3% a year.

Arithmetic: $355 x 1.03 to the 10th power = $477; $200 x 1.03 to the 10th power = $269. During the 90-day elimination period the owner pays the full cost: 90 x $355 = $31,950 at today's prices. Even in year 0, a $200 benefit leaves $56,575 a year to pay from income or savings ($129,575 minus $73,000).

Sources

The Retirement Literacy Foundation is a 501(c)(3) public charity. This page is general education, not tax, legal or investment advice. Nothing is sold here, no product is recommended, and RLF accepts no funding from financial companies. Rules and figures change; each one above shows its source and date. Check anything you plan to act on with your state insurance department or a qualified professional who is not paid on the product.