What is long-term care insurance, and is it worth buying?

Long-term care means help with daily activities such as bathing, dressing, eating, and mobility, delivered at home, in assisted living, or in a nursing facility. Health insurance does not cover it, and Medicare covers only limited skilled nursing following a qualifying hospital stay, not ongoing custodial care. That gap is substantial: HHS research indicates a majority of people turning 65 will need some long-term care during their lives, and nursing facility costs run into six figures annually in much of the country. Medicaid covers long-term care but only after assets are largely spent down.

Long-term care insurance pays a daily or monthly benefit once you cannot perform a specified number of activities of daily living or have a cognitive impairment. Its problems are well documented. Insurers substantially underpriced early policies and many have imposed steep premium increases on existing policyholders, sometimes repeatedly, which is permitted with regulatory approval. Several carriers exited the market. Underwriting is strict, so applying after a health problem appears often means denial, and premiums rise sharply with age at purchase, with the common recommendation being to consider it in the mid-fifties to early sixties.

The variables that determine value: the daily benefit amount, the benefit period, the elimination period before benefits begin, and whether an inflation protection rider is included, which materially raises the premium and is close to essential given how far in the future the benefit may be used. Hybrid policies combining life insurance or an annuity with long-term care benefits have grown as an alternative, offering a death benefit if care is never needed and generally fixed premiums, at higher cost and with their own complexity. The honest framing is that this is a real risk with no clean solution: self-funding requires substantial assets, insurance is expensive and imperfect, and Medicaid requires impoverishment, so the decision turns on your asset level, family situation, and tolerance for each of those outcomes.