July 6, 2022

Should You Consider Long-Term Care Insurance?

In Insurance, Wealth Strategy

Vonie Bright
Contributions from: Vonie Bright, CFP®

For some people, it may be difficult to imagine a future in which you need help taking care of yourself.  Although the amount of care varies for each person, statistics tell us that 7 out of 10 people who reach the age of 65 will need long-term care at some point in their life.[1]  Statistics also tell us women are often more likely to need long-term care and may require care for longer periods of time than men.

This article will cover various ways to pay for long-term care and help you understand which solutions may be right for you.

Will my long-term care needs be covered by Medicare?

Many people assume Medicare will pay for long-term care expenses. However, that is not the case.  Medicare will cover costs associated with care provided by a skilled nursing facility following a qualifying 3-day hospital stay.[2]  The coverage paid by Medicare is based on the duration of the facility stay, reflected as follows:

Days 1-20:  Costs for a skilled nursing facility are covered by Medicare

Days 21-100:  Costs in excess of $194.50 per day are covered by Medicare

Days 101 and beyond:  No Medicare coverage / Patient covers all costs

Similarly, Medicare will pay for some home health benefits if you are homebound[3], but will not pay for long-term personal care such as help with dressing, bathing, feeding, using the bathroom, mobility (transferring), or homemaker services such as cooking, shopping, cleaning, and laundry.  Any additional care needs will have to be paid out-of-pocket.

What are my options for covering long-term care costs not covered by Medicare?

There are no right or wrong solutions when it comes to covering long-term care.  Each solution looks different and has its own pros and cons.  Let’s look at some of the potential options available to you.

Care Provided by Family Members:

Historically, caring for aging family members meant bringing them into your home to provide the daily care they needed.  If you are considering this option as part of your long-term care plan, ask yourself these questions:

  • Do I have family members who have the time, skill, ability, and desire to care for me in this way?
  • Do they have an appropriate physical space where I could reside with them?
  • Do they have the financial resources to care for me?
  • Do I want my family members to have the role of primary caregiver as I age?
Spend Down Assets and Utilize Medicaid:

Although Medicare will not pay for most long-term care needs, Medicaid sometimes does.  To qualify for Medicaid coverage you must meet some strict resource limits and spend down your assets to align with state-specific Medicaid requirements.

For example, in Washington State you must spend down your personal assets to $2,000 and may not have more than $603,000 in equity in your home before you qualify for Medicaid.  If married, your spouse can keep an additional $130,380 on hand for their own spousal resources.  There are some additional annual income restrictions that change periodically based on the Consumer Price Index.[4]  Lastly, it’s important to note that once you qualify for benefits through Medicaid, you can only receive this care through a Medicaid approved provider.

Self-Fund with Personal Resources: 

With careful planning, self-funding can be an option for some people.  Keep in mind, the cost of long-term care can be very expensive and is rising each year.  For example, in the Seattle area, the average cost of a private room in a skilled nursing facility totaled $143,810 per year in 2022.[5]

Other options for care include assisted living facilities, adult day health care, receiving care at home from a home health aide, and homemaker services; all of which have varying costs depending on the extent of care needed and the hours of care required per week.

Utilize Long-Term Care Insurance:

Another option to consider is utilizing long-term care (LTC) insurance.  LTC insurance typically begins to pay benefits when you can’t do two of the six activities of daily living, known as “ADLs.”

ADLs include:

  • Bathing
  • Dressing
  • Eating
  • Using the bathroom
  • Transferring (moving from a seated position to walking, from bed to standing, etc.)
  • Continence

In addition to the six ADLs listed above, cognitive impairment (Alzheimer’s disease, dementia, etc.) will also trigger LTC insurance benefits.

There are multiple types of LTC insurance you might consider, including:

Traditional Long-Term Care Insurance: This type of insurance covers only long-term care needs and allows you to customize your insurance based on the monthly benefit amount, waiting period, duration of coverage, inflation options, and home health care or assisted living coverage.  In some cases, you can also have a shared benefit plan with your spouse.  A downside to the traditional LTC policy is paying the insurance premiums and not receiving any payments in return if you don’t trigger benefits due to your health situation – similar to a homeowner’s or auto insurance policy when you have no claims.

Life Insurance or Annuity Policy with a Long-Term Care Rider: Some life insurance and annuity policies allow you to add-on an additional benefit or “rider” to the policy.  Having a LTC rider allows the policy to pay out as originally stated or be utilized for long-term care needs.  For example, the life insurance policy would pay out a death benefit upon your passing or it could pay out an equal amount in long-term care benefits over time (once benefits are triggered).  You have the option to select the total dollar amount of coverage and the maximum monthly LTC benefit.

Single Pay Asset Based Insurance Policy: Single pay life insurance policies generally require a large one-time upfront premium payment, as opposed to monthly premium payments.  The payout for long-term care benefits comes in the form of an accelerated death benefit, which is triggered by needing help with two of the six ADLs or having a cognitive impairment.

What about the new Washington State “WA Cares Fund?”

The WA Cares Fund launched in January 2022, but program implementation has been delayed to July of 2023.  This program will be funded by a new payroll tax of 0.58%.  Once you have paid into the program for a minimum of 10 years and trigger benefits by being unable to do three of the six ADLs, you will be eligible to receive up to $100 per day for long-term care needs, up to a maximum lifetime benefit of $36,500.  This coverage is pro-rated for those paying into the program for less than 10 years.  As mentioned previously, the cost for long-term care services can quickly exceed the $36,500 coverage amount, making it insufficient to meet LTC needs for many people.


There are various options to consider when planning for your potential long-term care needs.  While there are pros and cons to each solution, the most important thing you can do is begin planning for possible long-term care needs.  If you’d like to discuss your options based on your personal situation, please reach out to a wealth manager at Coldstream.

Disclaimer:  This article has been provided for informational purposes only and should not be considered as investment advice or as a recommendation.  This material provides general information only.  Coldstream does not offer legal or tax advice.  Circular 230 Notice:  to ensure compliance with requirements imposed by the IRS, this notice is to inform you that any tax advice included in this communication, including any attachments, is not intended or written to be used, and cannot be used, for the purpose of avoiding any federal tax penalty or promoting, marketing, or recommending to another party any transaction or matter.

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