Long Term Care Planning

Financial planning for long-term care

Financial planning for long-term care

In this article

— Last Updated May 27, 2022

Read Time
4 mins
Reviewed by
Eric Berkman

Guide Financial planning for long-term care

— Last Updated May 27, 2022

Stephanie Wilson

Director of Operations


Reviewed by

Eric Berkman

Long-term care isn’t something you want to think about, but it might be necessary at some point. It’s essential to be financially prepared for when that time comes.

Planning ahead for long-term care costs is one of the most important things you can do, and you should consider them as part of your overall budget and financial plan. This article discusses the importance of planning ahead financially, the costs, and how to pay for long-term care.

What long-term care entails

There are three distinct types of long-term care. One can receive all three services at home or in special facilities such as assisted living or retirement homes.

Custodial care

Custodial care is the earliest and most common form of long-term care. A custodian’s responsibilities include helping someone eat, dress, bathe, and move around. Custodial care is seldom considered medical treatment. A family member may give home care without being paid, or a professional such as a nurse’s aide or a therapist may do it for a fee.

Intermediate care

The next level of care after custodial care is intermediate care. Sometimes, but not very often, a doctor or other trained medical expert will administer care. A weekly rehabilitation program is an example of such a program.

Skilled care

The third category of care is skilled care, which involves trained professionals providing medical services around the clock. In reality, skilled care can be provided in many settings, including your own home, an assisted living facility, a hospital, and more.

What is Long-term care, and what are the costs associated with it? 

You may need long-term care if you cannot carry out basic self-care tasks. This category falls under activities of daily living (ADLs), including eating, bathing, dressing, transferring, and toileting. Long-term care is intended to assist you in keeping up your current living standard as you age.

As long-term care is expensive, it is essential that you begin planning how you will pay for your long-term care expenses in the future. Genworth’s Cost of Care study in 2021 revealed care costs increased dramatically. Median annual costs for the type of care you might need have increased in the following ways:

  • Home health assistants typically cost $61,776.2 per year, up 12.5% from a year ago. A personal care worker provides the patient with things like bathing, dressing, and feeding.
  • It has risen 10.64% to $59,4882 for yearly homemaker services, which include “hands-off” chores like cooking, cleaning, and running errands.
  • There was a 2.41% increase in the cost of a private nursing home room from the previous year, while the cost of a semi-private room in a nursing home grew by 1.96% to $94,900.

The good news is that there are ways to pay for your long-term care needs, even if you do not have insurance. But it’s essential to start planning now while you’re still healthy and have time to make thoughtful decisions about your finances.

Paying for long-term care

Long-term care can be provided in the home or a residential care facility, and both options have a variety of payment structures. It is also important to note that the costs vary by state. However, you can protect your future financial stability and mental health if you create a financial plan now.

Long-term care insurance

When you have a chronic medical condition, disability, or cognitive impairment, long-term care insurance can help cover the costs. When you purchase a long-term care insurance policy, you can decide how much coverage you would like and how long it should last.

Life insurance policies

If you wish to have long-term care coverage for the remainder of your life, a policy with a rider may be more appropriate. There will be lower premiums than those for long-term care insurance. However, it is essential to note that you will not be reimbursed for your premiums if you do not use them.


Annuities with long-term care riders are another option worth considering. An annuity of this type provides a fixed monthly payment for the remainder of your life. Similar to a life insurance policy with a long-term care rider, the premiums for long-term care insurance are generally lower. Additionally, you can cancel the annuity if you no longer need the coverage.

Asset-based long-term care insurance policy

A standard method of preparing for long-term care is to purchase asset-based long-term care insurance. Unlike conventional health insurance, these plans pay for healthcare costs. Your loved one or you will benefit from this if you ever need to enter a nursing home.

Hybrid policy

A hybrid policy combines regular life and long-term care insurance to help cover long-term care costs. It is crucial to remember that the cost of your premiums will vary based on factors such as your age, gender, and health.

Reverse Mortgage

You can use the equity in your home to borrow against a reverse mortgage. Paying for long-term care can be accomplished using the proceeds from the loan.


Your eligibility for Medicaid depends on your financial situation, as it is a need-based program. Most Medicaid recipients are only eligible for coverage if their assets and income are limited. Therefore, you might need to sell your home or other property to qualify.

Planning is essential if you are considering Medicaid. The eligibility requirements and the process can be complicated, so you’ll need the help of an experienced attorney or financial planner.

Long Term Care Planning and Insurance Specialists

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When should you invest in long-term care?

Most people in their 80s file long-term care insurance claims. As a result, between the ages of 45 and 65 is usually the most cost-effective period for purchasing. However, a purchase of a policy made too early will result in longer premium payments.

What type of care is typically not covered in a long-term care policy?

Most long-term care insurance policies do not cover care provided by family members. Medical care costs are also generally not covered by this plan-private health insurance or Medicare usually covers those.

Which insurance does not cover most long-term care costs?

Medicare does not cover long-term care; only a small portion of acute care is covered. Low-income individuals are more likely to qualify for Medicaid, which pays for part of their long-term care expenses.

What is typically covered in a long-term care policy?

These policies do not pay for care received in a Nursing Home, Assisted Living Facility, or Residential Care Facility for the Elderly. The insurance covers home health care, adult daycare personal care, homemaker assistance, hospice care, and respite care.

Final Thoughts

It’s important to consider how you will pay for long-term care before you need it. By planning ahead, you can ensure you have the money you need to cover care costs. There are several different ways to pay for long-term care, and each has its own benefits and drawbacks.

You will need to decide which option is right for you. The best way to make this decision is to consider your needs and budget. You should also consult a financial planner or one of our expert advisors to get help making the right choice.

Stephanie Wilson


December 21, 2022

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