Tax Guide

Get answers to all your questions about taxes, personal finance, insurance and more.

The Ins and Outs of Long-Term Care Insurance

Long-term care (LTC) insurance helps cover costs if you, your spouse, or dependent becomes chronically ill.

Every year more and more Baby Boomers are retiring and needing long-term care. The aging of Americans coincides with rising long-term medical costs: a private room at a nursing home can easily cost over $50,000 per year. LTC insurance can cover expenses like in-home care and nursing or long-term care facilities.

There are also tax advantages to enrolling in a LTC plan. If you pay for LTC insurance, you may be able to deduct any premiums you pay for the year. The deductible amount varies with your age. And if you’re currently receiving payments from a LTC plan, you may be eligible to exclude those payments from income. See LTC Insurance and Your Taxes.

But: Not all LTC plans qualify for tax breaks. Contact your HR department or LTC insurance company to make sure.

Who Should Have LTC Insurance?

LTC insurance is not just for those thinking about retiring soon. If you or your spouse become chronically ill, you don’t want to use up your retirement funds to pay for care. But for anyone, LTC insurance is a good investment in case of a sudden and expensive medical condition.

What’s considered a chronically ill condition? A licensed health care practitioner must certify that you're unable to perform at least two of the following daily activities for at least three months: eating, dressing, bathing, toileting, or moving yourself. This certification must have been applied for within the last 12 months. Those with a severe cognitive impairment, like Alzheimer’s or dementia, are also considered chronically ill.

Important: All services provided under LTC insurance must be provided by a licensed physician, RN, or licensed social worker. Family members don’t qualify unless they're licensed.

When Should You Buy LTC Insurance?

You can purchase LTC insurance at any time, but in your late 40s to 50s is often recommended as a good age range. Buying LTC insurance earlier can also be a good option, because it allows you to lock in a lower premium. Locking in low premiums can mean saving thousands in future years.

But: Depending on who you’re applying for LTC insurance through, you may have to “health qualify,” meaning you may have to fill out medical questionnaires or even have a physical. Check the plan requirements for details.