Long-Term Care Insurance: Is It Worth It? (2025)

My grandmother spent her last three years in a nursing home. The cost was around $8,000 a month. My family burned through her entire savings—everything she’d worked for—in about two years. Then Medicaid kicked in once she had nothing left.

That’s the ugly reality nobody wants to talk about. Long-term care is insanely expensive and Medicare doesn’t cover it. Not custodial care anyway. Not the kind where you need help with daily stuff like bathing and eating.

Long-term care insurance exists to prevent this nightmare. But it’s complicated and expensive and there’s a lot of debate about whether it’s actually worth it.

What long-term care insurance covers

Pays for care you need when you can’t perform basic daily activities on your own. Usually defined as needing help with at least 2-3 “activities of daily living”—bathing, dressing, eating, toileting, transferring (moving from bed to chair), continence.

Can cover: nursing homes, assisted living facilities, home health aides, adult day care. Different policies cover different things at different amounts.

Typically pays a daily or monthly benefit. Like $200/day for nursing home, $150/day for assisted living, $100/day for home care. Some policies have “pool of money” you can use however you want until it runs out.

The cost problem

Long-term care insurance is expensive. Like really expensive. And it’s gotten more expensive over time.

Average cost for someone buying in their 50s is around $2,000-4,000 per year. Wait until 60s and it’s more like $3,000-6,000+. And these are averages—depending on your health, coverage amount, and policy features it could be way more.

Worse: premiums can increase. Unlike life insurance where premium is locked in, LTC insurance companies have raised rates on existing policyholders. People who bought policies 15 years ago have seen premiums double or triple. Some had to drop coverage they’d been paying into for decades.

This has caused a lot of bitterness. And honestly legitimate anger.

The math question

Here’s the brutal calculation. Average nursing home costs around $95,000/year now. Average stay is 2-3 years. So call it $200,000-300,000 in potential costs.

Pay $3,000/year for 20 years in LTC insurance premiums, that’s $60,000. If you need the coverage and use it, you come out way ahead. If you never need it, you’ve paid $60,000 for nothing.

Problem is: who needs it? About 70% of people over 65 will need some form of long-term care. But many won’t need nursing home level care. Some need care for months, some for years. There’s huge variation.

Medicare doesn’t cover this

Common misconception. Medicare covers short-term skilled nursing after a hospital stay—like rehab after a hip replacement. Covers up to 100 days with significant copays after day 20.

Medicare does NOT cover long-term custodial care. The ongoing help with daily activities. The nursing home stay that lasts years. That’s not covered.

Medicaid does cover it—but only after you’ve spent down nearly all your assets. That’s what happened to my grandmother.

Alternatives to traditional LTC insurance

Because of the premium increase issue, some alternatives have emerged.

Hybrid policies combine life insurance with long-term care. If you need LTC, it pays for that. If you die without using LTC, death benefit goes to beneficiaries. If you decide you don’t want it, you can surrender for cash value. More flexible than pure LTC insurance.

Self-insuring means just saving aggressively and hoping for the best. Works if you have enough assets. Risky if you don’t.

Asset protection trusts and Medicaid planning are legal strategies but complicated and need an elder law attorney.

Who should consider LTC insurance

People with assets to protect but not so wealthy they can easily self-insure. If you have $200,000-2,000,000 in assets, long-term care could wipe you out but you’re not rich enough to just absorb the cost.

Family history of dementia, Alzheimer’s, or other conditions requiring long-term care. Higher risk means coverage more likely to pay off.

No spouse or family members who could provide care. If you’d definitely need paid help, insurance makes more sense.

People who want to protect inheritance for kids or spouse. Without coverage, assets go to nursing home bills. With coverage, something might be left.

Who might skip it

Very wealthy people who can self-insure. If you have $5 million, you can probably afford to pay for care directly.

Very low-asset people who would qualify for Medicaid relatively quickly anyway. Harsh but realistic math.

People with significant health issues who can’t qualify or would face very high premiums.

My take

I watched my grandmother’s situation destroy years of savings in a blink. It was awful. But I also know the premiums are brutal and the rate increases have burned a lot of people.

If I were looking at this today I’d probably consider a hybrid policy instead of traditional LTC insurance. More flexibility, no risk of paying premiums for decades and getting nothing. But those have their own complications.

There’s no clean answer. Just math and risk tolerance and uncomfortable conversations about what happens when you get old and need help.

Collision is being very cuddly today which probably means she’s about to do something annoying—anyway. Think about this stuff before you need to. Have the uncomfortable conversation with aging parents. Look at the costs in your area. Make some kind of plan even if the plan is “we’ll figure it out.” That’s better than nothing.