Financial Planning for Long-Term Care: Insurance and Costs (2025)

Few people enjoy thinking about the possibility of needing assistance with everyday tasks, yet long-term care is not a remote scenario—it is a realistic consideration for many. Without proper planning, the cost can erode savings far more quickly than expected.

Long-term care (LTC) encompasses services that extend beyond traditional nursing homes and include a range of support options. It includes in-home support, assisted living, adult day programs, and intermediate services for individuals who require assistance but do not need full medical supervision. And none of these options is inexpensive.

This piece explores what long-term care entails, how to estimate costs as accurately as possible, and how to prepare so that financial strain does not unexpectedly fall on you or your family. Although it may not be an enjoyable read, it is essential.

Step 1 – Understand What Long-Term Care Includes

Long-term care encompasses a wide range of services, from nursing homes and hospitals to home health aides who assist with daily activities and facilities that provide meals and basic medical monitoring.

People need these services for various reasons—age-related limitations, chronic conditions, strokes, or cognitive decline. In most cases, care lasts far longer than anticipated.

Few individuals realize how varied and costly LTC can be. Home care may involve paying around $30 per hour, assisted living may reach $5,000 per month before medical fees, and nursing homes often exceed $9,000 per month, depending on the location.

Long-term care is fundamentally a support system for later life. The central question is: how will it be funded?

Step 2 – Estimate the Cost of Long-Term Care

There is no universal cost because expenses depend heavily on geography and the level of care required. Costs in Kansas differ from those in California, though both remain substantial.

Home health aides typically earn around $5,000 per month for part-time support, and assisted living facilities usually cost about $4,500 per month. These figures rise annually, often at a rate faster than the general inflation rate.

A common mistake is underestimating the duration of care needed. The average duration is approximately three years, but chronic conditions or cognitive decline can significantly extend this period. That represents a major financial commitment.

The most effective planners research costs using tools such as the Genworth survey, state health resources, and local cost calculators. While no estimate is perfect, informed projections are far better than assumptions.

Step 3 – Consider Long-Term Care Insurance

Long-term care insurance is a vital safeguard that can help prevent significant financial strain in the future.

Traditional LTC insurance covers services not included in typical health insurance or Medicare, such as daily personal care, in-home assistance, and extended nursing facility stays. Policyholders pay premiums, and insurers cover costs within set limits.

Hybrid policies combine life insurance with LTC benefits. They are more expensive, but unused LTC benefits are paid to beneficiaries, offering additional value.

Premiums depend on age and health, and costs increase quickly over time. Individuals in their 50s may secure reasonable rates, while those in their late 60s may find policies significantly more expensive. Still, relying solely on personal savings or out-of-pocket payments is often less feasible.

Careful comparison is essential. Reviewing multiple policies, understanding benefit structures, and learning key terms helps ensure the policy will meet future needs.

Step 4 – Assess Your Eligibility for Government Assistance

When people assume the government will cover long-term care, they usually confuse Medicaid with Medicare.

Medicare covers short-term rehabilitation after hospitalization, up to 100 days, for those who qualify. It does not cover long-term care. Medicaid does, but only for individuals with limited income and assets.

Qualifying typically requires spending down personal assets, though certain exemptions exist for a spouse or primary residence. Planning through legal strategies or appropriate trusts is possible but complex, and best handled by an elder law attorney or financial advisor.

Navigating eligibility after entering a nursing facility can be extremely challenging, so early preparation is crucial.

Step 5 – Plan for Funding Long-Term Care Costs

After understanding likely expenses and insurance options, the next step is to determine how to fund care.

Begin by reviewing your savings and identifying the portion that can support care without jeopardizing your retirement income or your spouse’s financial security. Some individuals choose to downsize their homes, using the equity to cover care costs. Others rely on investments or convert assets into annuities for steady income.

Reverse mortgages may be suitable for individuals who are aging in place and have substantial home equity. While not suitable for everyone, they can help support home-based care.

Short-term financial tools, such as Beem’s Instant Cash, can help address immediate costs or unexpected medical bills without disrupting long-term investment strategies.

The most resilient plans rely on multiple funding sources rather than a single option.

Step 6 – Determine the Right Time to Purchase LTC Insurance

Timing significantly affects affordability. Purchasing LTC insurance too early results in paying premiums for decades; purchasing too late increases costs or risks denial.

Generally, the ideal age range is the 50s to early 60s, when individuals are more likely to qualify and premiums remain manageable.

Inflation protection is an important feature. Though it raises premiums, it ensures that future benefits keep pace with rising care costs.

Purchasing coverage at the right time provides important reassurance for years to come.

Step 7 – Look Into Other Forms of Care Funding

LTC insurance is not the only solution. Some life insurance policies include accelerated benefit riders that enable policyholders to utilize a portion of the death benefit to cover medical expenses.

Health Savings Accounts (HSAs) offer another effective option. Contributions are tax-deductible, and withdrawals for qualified medical expenses—including eligible LTC premiums—are tax-free.

Some people create dedicated healthcare savings accounts specifically for future care. Consistent contributions today can reduce stress during future health events.

Step 8 – Research and Compare Long-Term Care Providers

Financial planning often overshadows the equally important task of evaluating the quality of care.

Facilities and care providers vary significantly in cleanliness, staffing, and overall environment. Conducting thorough research—touring facilities, speaking with families, reviewing ratings, and verifying credentials—helps ensure an appropriate choice.

Costs and quality differ widely. Selecting a provider should strike a balance between affordability and standards of care.

Step 9 – Prepare Your Family for Caregiving Responsibilities

Long-term care planning often requires the involvement of family members. Someone must manage decisions, paperwork, and oversight, and in many cases, provide direct care.

Early discussions help avoid confusion and stress. Determine who will take the lead, how costs will be handled, and whether medical or financial powers of attorney are in place.

Caregiving can be demanding both physically and emotionally. Financial tools, including emergency support like Beem’s Instant Cash, can help manage last-minute expenses, but emotional readiness is equally important.

Step 10 – Regularly Review Your Long-Term Care Plan

A long-term care plan should be revisited periodically. Health needs change, finances shift, and care options evolve.

Relocation, asset changes, and insurance adjustments all influence whether an existing plan remains appropriate. Regular review ensures that future needs are met without unexpected gaps.

The most effective planners treat LTC preparation as an ongoing process rather than a one-time decision.

FAQs on Financial Planning for Long-Term Care: Insurance and Costs

How much does long-term care cost per month?

Costs vary depending on the type of care and location. In-home aides average around $5,000 per month, assisted living around $4,500, and nursing homes often exceed $9,000. Rates vary significantly by region.

Should I get long-term care insurance or rely on Medicaid for my care needs?

Individuals with meaningful assets should consider LTC insurance. Medicaid covers long-term care but requires meeting strict financial criteria, often after spending down assets.

What is the best age to buy long-term care insurance?

Typically, the optimal time is in your 50s or early 60s, when premiums remain reasonable and approval is more likely to be granted.

How does long-term care insurance work with Medicare or Medicaid?

Medicare provides only short-term recovery care. Medicaid covers long-term services for those who meet financial eligibility requirements. LTC insurance fills the gap between these programs.

How can Beem’s Instant Cash feature help manage unexpected long-term care expenses?

It offers quick access to short-term funds for urgent care needs, helping you avoid premature withdrawals from long-term investments.

Conclusion

Planning for long-term care is not about pessimism; it is about preparation. Health needs evolve and costs continue to rise, regardless of personal preference.

With the right combination of insurance, savings strategies, and flexible financial tools, individuals can protect themselves and their families from significant financial stress. When unexpected situations arise, short-term solutions like Beem’s Instant Cash can provide helpful support. Download the app now!

Ultimately, the most challenging scenario is facing long-term care without a plan in place.