Making the Call on Long-Term Care Insurance: The Head, the Heart, and the Numbers

It is not uncommon to sit across the table from a couple in their mid-50s who did everything “right.” Spent less than they earned for decades, avoided lifestyle inflation, funded college accounts, and started to see the amazing power of compounding at work in the portfolio. They have a critical question, but it isn’t about markets or taxes.

It usually sounds something like this, “We watched my father spend his final years in assisted living and skilled nursing care. It was expensive and exhausting. Should we be doing something now to protect ourselves?”

There is a season of life, usually between ages 50 and 60, when financial progress shifts from accumulation to protection, prudent decumulation, and leaving a legacy. The foundation has been built, and it is meaningful. Naturally, the conversation turns to preserving it. Long-term care insurance (LTCi) can be an effective tool, but its real-world effectiveness warrants employing both left-brain analytics and right-brain gut feel, all around what is invariably an unpleasant topic. It forces us to confront physical decline, cognitive impairment, and dependency. For families who have built substantial assets, it is a serious planning decision — not an emotional one. What needs to be factored in and what helps us decide?

The first aspect to address when discussing long-term care is probability and degree of the need, which requires distinguishing between needing assistance and entering a facility. According to the Administration for Community Living (ACL), part of the U.S. Department of Health and Human Services, approximately 70% of individuals turning age 65 today will require some form of long-term care during their lifetime. That figure often sounds alarming, but it is frequently misunderstood.

“Needing care” may mean help with activities such as bathing, dressing, mobility, medication management, or supervision due to cognitive decline. It does not automatically mean a “nursing home” and all the perceived negative connotations associated with that term. To help weigh the decision on purchasing and insurance products, we need to know our odds, for lack of a better term. The true numbers behind institutional care (nursing home) are:

• Roughly 15%–25% of Americans age 65+ will spend time in a nursing home at some point.
• Only about 8%–10% will require nursing home care for five years or longer.
• Assisted living utilization is also materially lower than many assume.

The reality is most long-term care is delivered at home, often by a spouse, adult children, or hired aides.

That distinction matters. The catastrophic, multi-year nursing home scenario is possible but statistically less common than most think. The more likely path is a period of home-based care with shorter assisted living stays.

The Administration for Community Living reports that men who do require care need assistance for an average of 2.2 years while women require care for an average of 3.7 years. Overall, about 20% of individuals will need care for more than five years. According to the 2023 Genworth Cost of Care Survey, a private nursing home room can cost approximately $108,000 per year; an assisted living facility can cost approximately $64,000 per year; and a home health aide (around 44 hours per week) can cost approximately $75,000 per year. With medical inflation historically outpacing general inflation, the exposure could be materially higher decades from now, hence the risk to the financial foundation.

The long-term care insurance industry has undergone a substantial change over the past twenty years. At the outset of the new product introductions, insurers underestimated longevity, claim duration, and the impact of prolonged low interest rates. The result was widespread mispricing and many carriers exiting the market. The companies that remain now price more conservatively and underwrite more carefully.

So, what does coverage cost today?

According to surveys conducted by the American Association for Long-Term Care Insurance (AALTCI), a healthy 55-year-old purchasing a traditional policy with:

• A three-year benefit period
• Approximately $165,000 initial benefit pool
• 3% compound inflation protection
• 90-day elimination period

May expect annual premiums roughly in these ranges:

• Male: $1,700–$2,500
• Female: $2,700–$3,500

This means a married couple purchasing comparable policies might expect combined premiums of approximately $4,500–$6,000 annually, depending on health and policy design. These are not insignificant commitments, as a couple paying $5,000 annually for 20 years has committed $100,000 before any claim occurs, which leads to the real issue: If one of us requires extended care, how does that affect the broader wealth plan?

For financially successful families, the question is rarely about survival. It is about impact.

• Retirement Income Stability: If projected retirement spending is $180,000 annually and one spouse requires $120,000 per year in care, total household outflows could approach $300,000. Layer that onto market volatility, especially early in retirement. Elevated withdrawals can amplify sequence-of-returns risk and permanently alter portfolio trajectory. Insurance, in this context, acts as a balance sheet stabilization.
• Legacy Objectives: It is a very common legacy goal for a couple to transfer meaningful assets to children or charitable causes. Redirecting several hundred thousand dollars toward care may be acceptable, or it may materially shrink intended bequests. The difference depends on values and priorities, with the cost effectively acting as a hedge with LTCi functioning as a tool to preserve estate integrity, if that is a primary objective.
• Protection of Healthy Spouse: Perhaps the most compelling argument is spousal protection. If one spouse requires care for several years, the other may face both emotional strain and financial pressure simultaneously. Dedicated liquidity from an insurance policy during that period can preserve flexibility and reduce anxiety at precisely the wrong time to be making complex financial decisions, in the absence of coverage.

Many couples view home equity as self-insurance. Mathematically, that can work as a mortgage-free home represents a substantial pool of capital. Behaviorally, however, the plan becomes more complicated. If both spouses require facility-based care, selling the home is logical. But if only one spouse requires care, does the healthy spouse want to move out of their home and downsize if she (he) doesn’t require care?

Research consistently shows a strong preference among older Americans to age in place that makes sense. The family home is not merely a financial asset because it carries much more emotional weight. A plan banking entirely on liquidation of that home often collides with human behavior, and behavior matters as much, or more, as math.

Rather than taking a guess as to whether you should buy long term care insurance, what’s required is a thorough and well-thought-out retirement cash flow plan factoring in all the “what ifs?” This plan should model in, and attempt to incorporate and address, the most revealing questions about a family’s actual circumstances:

1. What is the projected exposure for long term care in tomorrow’s inflated dollars?
2. What is the health history for each spouse health, and what is longevity history in their family tree?
3. How would a multi-year care event affect retirement income sustainability for one or both spouses?
4. What would it mean for the healthy spouse?
5. How would it alter legacy goals?
6. How impactful would decades of insurance premiums be to the cash flow plan or we comfortable self-funding the risk exposure internally?

Critically, working with an objective advisor who does not financially benefit from the family purchasing a policy is imperative. Of course, there are many reliable, credible, and ethical salespeople who also give wealth planning advice. We believe it is a best practice to separate the advice from the commission, as has been the practice of our firm since our founding in 1965.

For some families, self-funding is entirely reasonable. For others, transferring part of that risk improves resilience and peace of mind. The answer is rarely binary but rather contextual and requires applying the family’s unique and personal profile.

When a couple asks whether they should “do something now,” what they are really asking is not about a policy. They’re asking about a structured and thorough process to make an informed decision, factoring in their own circumstances. Very often, they’ve endured a parent’s decline, witnessed the emotional and financial toll for one or both of their parents, and they want clarity. The goal of the comprehensive wealth plan is not to eliminate uncertainty because that is unfortunately impossible. The goal is to help decide, deliberately, which risks to retain and which risks to transfer via insurance premiums.

Long-term care insurance is neither mandatory nor universally appropriate. Ignoring a potential six-figure-per-year risk over a multi-decade retirement is also a decision. The right answer emerges not from fear, but from disciplined analysis — the same disciplined approach that built the financial foundation in the first place.