The best advice for buying long-term-care insurance in 2025—don’t, says insurance expert Glenn Daily, CFP, ChFC, CLU.
Obtaining insurance that can help pay for pricey nursing home stays or other long-term care down the road seems like a responsible financial decision. After all, the median cost of a private room in a nursing home has climbed to well over $100,000 per year—that staggering sum can quickly deplete the savings of those who must pay out of pocket.
But premiums for long-term-care insurance also are very high these days. Precisely how high varies greatly depending on a range of factors, but when you crunch the numbers, it is reasonable to postpone making a purchase decision.
Here’s what you need to know about long-term-care insurance costs in 2025 and the best strategies for consumers…
A statistic known as benefit/cost ratio provides a useful gauge of any insurance policy’s value. It discloses how much policyholders get back in benefits, on average, for every dollar they pay in premiums.
Examples: The Affordable Care Act generally requires that health insurance have a benefit/cost ratio of at least 80%—meaning that policyholders get back at least 80 cents in benefits for each $1 they pay in premiums (or receive either a partial refund, rate reduction, or a similar rectification). Home and auto policies tend to be above 60%, though there’s significant variation from policy to policy.
Long-term-care insurance historically had a projected benefit/cost ratio of about 60%, but the policies currently available appear to land between 40% and 50%. In other words, long-term-care insurance policies pay back in benefits less than half of what they charge in premiums. Officially many states still have rules on the books that require long-term-care insurance benefit/cost ratios to be no lower than 60%…but in practice, insurers are allowed to build big cushions into these calculations, rendering these rules moot. Insurance regulators are allowing this because they’ve shifted their focus from enforcing long-term-care insurance benefit/cost ratios to pursuing rate stabilization to minimize the risk that insurers will later need to increase the premiums they charge existing policyholders. These rate-stabilization efforts have succeeded—if you purchase a long-term-care insurance policy this year, you can be fairly confident that your premiums won’t be increased later, an issue that has affected many buyers of earlier long-term-care insurance policies. But this focus on rate stabilization also has made long-term-care insurance policies so expensive that it’s reasonable to wonder if they are worth buying now. Hybrid long-term-care insurance policies that combine life insurance with long-term-care insurance sometimes are cited as better deals, but in reality, they’re just more complicated—the long-term-care insurance components of these hybrid policies might not have a higher benefit/cost ratio than standalone policies.
Where does this leave those of us who want to protect ourselves and our loved ones against the risk that we will incur massive long-term-care bills down the road? There is no perfect solution, but here’s what you can do…
If you already own an older long-term-care insurance policy, keep it in force. Policies dating back to 2016 or earlier tend to offer attractive benefit/cost ratios . Those high ratios may lead to rate hikes, which inevitably infuriate long-term-care insurance policyholders…but unwelcome as these hikes are, they’re occurring because the insurers accidentally gave policyholders great deals. Bottom line: Even with rate hikes, these older policies are much better deals than any long-term-care insurance policy available now.
If you cannot fit your policy’s premium increase into your budget: You may be able to keep the policy in effect without paying increased premiums by accepting a lower daily benefit, a reduced benefit period, a reduced inflation benefit and/or a longer elimination period.
If you want long-term-care insurance but don’t yet have a policy, postpone this purchase and keep an eye on the market. The conventional rule of thumb for purchasing long-term-care insurance has long been that you should not wait beyond your 50s—any older than that, and the odds increase that you’ll develop a health problem that will prevent insurers from selling you coverage. That rule of thumb still is accurate, but you need to weigh the risk of developing a disqualifying condition in any given year (probably less than 5%) against the possibility of having better funding solutions in the future. Considering the high prices of long-term-care insurance now, it is reasonable to hold off on buying…reevaluate long-term-care insurance rates every year…and hope you stay healthy.
There even is some reason for optimism that long-term-care insurance premiums might decrease in the future. Insurers might slowly gain confidence that they can charge less without having to impose rate hikes later…some issuers might start offering policies through fee-only financial professionals, eliminating costly commissions (this has already occurred in the life insurance and annuities sectors)…or medical breakthroughs in the treatment and prevention of Alzheimer’s disease or other forms of dementia could reduce the percentage of long-term-care insurance policyholders who require lengthy nursing home stays and, in turn, reduce insurer’s need to charge so much.
Helpful: If you delay the purchase of a long-term-care insurance policy but then develop a disqualifying health problem before you obtain coverage, consider buying an impaired risk life annuity instead, such as Federal Life’s Immediate Care Plan. These single premium immediate annuities (SPIAs) are designed specifically for people who have serious health problems, and they provide larger income streams than comparable annuities—and that money can be used to help pay long-term-care bills. Issuers can afford to pay these higher income streams because people who have serious health problems usually live shorter-than-average lifespans.
Follow a dementia-risk-reduction lifestyle. Reducing your dementia risk reduces the odds that you’ll need a very long—and expensive—stay in a long-term-care facility. A 2024 report by the Lancet Commission on dementia concluded that around 45% of dementia cases might be preventable if people took steps including obtaining treatment for high LDL cholesterol, hypertension, depression, hearing loss and vision loss…remaining physically active as they age…quitting smoking…wearing a seat belt and minimizing activities associated with head trauma…limiting exposure to air pollution…and avoiding social isolation, excessive alcohol consumption, and obesity and type 2 diabetes.
Take the money you intended to spend on long-term-care insurance premiums and invest it instead. If you don’t have a long-term-care insurance policy, it’s prudent to have as much savings as possible to pay future long-term-care bills out of pocket.
If you’re unwilling to wait to purchase long-term-care coverage despite today’s high premiums, look for a policy that will produce the smallest financial loss if you later decide to cancel or replace this coverage. This might be a hybrid policy that has a high cash value or a money-back guarantee, for example. Additional long-term-care policy options…
Use money from an unneeded permanent life insurance policy to buy a hybrid life/LTCI policy. If you have a permanent life insurance policy that you no longer need, you could remove money from that policy up to its cost basis—leave the amount that would be taxable if removed—then do a tax-free transfer (called a “1035 exchange”) to move the taxable remainder into a hybrid life/LTCI policy. The long-term-care and death benefits that you receive from this new policy should be income tax–free (but verify this with the issuer), so this could be a good deal versus surrendering your existing policy and paying tax on the gain.
Buy a traditional long-term-care insurance policy from Northwestern Mutual. Northwestern’s long-term-care insurance policies are not a better deal than other issuers’ these days, but they’re participating policies—meaning that policyholders receive dividends if Northwestern makes more profit from the policy than anticipated.
Take advantage of spousal discounts. These can decrease premiums by perhaps 15% for couples. That discount isn’t sufficient to make today’s long-term-care insurance prices a good deal, but it helps. To qualify, couples must purchase similar standalone long-term-care insurance policies.
Look for tax savings. Depending on your situation, you may be able to deduct your premiums from your taxable income, and some states, such as New York, also give a tax credit. These tax savings can have a significant impact on the after-tax benefit/cost ratio.
