Industry Experience

Long-term Care

Planning for long-term care is an integral part of retirement and financial planning. Longterm care consists of a continuum of services including nursing home care, assisted living, and home health and adult day care. The need can arise from an accident, illness, or advanced age.

THE RISK. Statistics make a very good case for long-term care planning. For example, a 65-year-old woman can expect to live another 20.1 years, and a 65-year-old man can expect to live another 16.8 years. According to the U.S. Administration on Aging, 70 percent of people attaining age 65 will need some form of long term care during their lifetimes. During these years it is estimated that the risk of entering a nursing home is approximately 50 percent.

THE COST. Nursing care is expensive. Although there is a large variation from one region to another, the average nursing home cost was $80,300 per year in 2017.

MANAGING THE RISK. For an individual with substantial retirement income and assets selfinsurance may be a realistic option. However, for those who cannot self-insure reliance upon government programs may be ill advised. For example, after a minimum three-day hospital stay Medicare will only pay for the first 20 days of skilled nursing care. From days 21 through 100 the patient must pay in 2017 the first $164.50 per day, and all costs after 100 days. Medicare does not pay for custodial care. Although Medicaid will pay for custodial care, the patient must first “spend down” assets in order to qualify. Private insurance is often considered by those desiring independence and choice of care and benefits. It also provides asset protection from the Medicaid spend down requirements.

PRIVATE INSURANCE provides flexibility by allowing individuals to obtain care in various settings and at different levels (skilled nursing, intermediate and custodial care). Contracts do not require prior hospitalization, are guaranteed renewable and offer level premiums. Daily
benefits run from $50 to $300 or more. The benefit periods are typically 2, 3, 4, or 5 years, or lifetime. Benefits are paid when the insured has a cognitive impairment or is unable to perform certain activities called “benefit triggers.” A deductible, in the form of an elimination period, will generally last from 0 to 180 days. Provisions for home health care and adult day care will allow the beneficiary to remain in the community. Of particular importance is waiver of premiums to limit premium costs and inflation protection to ensure an adequate daily benefit in the future.

In addition to these basic components, other benefits are often available. These features include spousal discounts, respite care, hospice care, caregiver training, bed reservation, medical equipment, cognitive reinstatement, non-forfeiture benefits, case management and referral services. Choosing from such a range of contract options requires a balancing of benefits and flexibility against premium costs.



The estimated risk of a 65-year-old person needing some form of long-term care during their life is 70 percent according to the U.S. Administration on Aging (see 


The average cost of nursing home care in the United States is nearly $80,300 per year in 2017 for a semi-private room. There is, however, a large variation from one region to another around this national average. In many states the average cost exceeds $100,000 per year with the highest average state at over $200,000 per year. 



Government Programs

  • Medicare
  • Medicaid

Self Insurance

  • Income
  • Assets

Private Insurance

  • Independence & Choice
  • Protection of Assets


  • Daily Benefit Amount
  • Benefit Period
  • When Benefits Paid
  • Elimination Period
  • Home Health Care
  • Adult Day Care
  • Waiver of Premium
  • Inflation Protection
  • Spousal Discounts
  • Respite Care
  • Hospice Care
  • Caregiver Training
  • Bed Reservation
  • Medical Equipment
  • Cognitive Reinstatement
  • Non-Forfeiture Benefits
  • Case Management
  • Referral Services

LONG-TERM CARE/CHRONIC ILLNESS HYBRID PRODUCTS are becoming increasingly popular. In recent years, the cost of new and existing (inforce) private long term care insurance has increased at a rate far exceeding inflation. A number of companies previously selling stand alone long term care insurance have exited the market. As a result of price increases and few companies offering stand alone long term care insurance, there has a been a tremendous growth in “hybrid products.” These products combine long term care or chronic illness riders with a life insurance or annuity contract. The cost of adding a long term care rider or chronic illness rider on a life insurance product will often increase the cost of the life product by ten percent or less making hybrid products an increasingly popular alternative to stand along long term care products.