Understanding Long-Term Care and Insurance: What You Need to Know

Is long-term care insurance right for you? These are some important considerations.

As we get older, the likelihood of needing long-term care increases. According to the U.S. Department of Health and Human Services, about 70% of people over the age of 65 will need some form of long-term care during their lifetime. This care can range from help with daily living activities, such as bathing and dressing, to more specialized medical care in a nursing home or assisted living facility.

Unfortunately, traditional health insurance plans or government programs like Medicare often do not cover long-term care. This can lead to significant financial strain on families and individuals when they need this type of care. In this article, we’ll discuss the importance of long-term care insurance and self-insuring, and how to choose the best option for your situation.

The Problem: Lack of Preparedness and High Costs

Many people are unprepared for the costs of long-term care. According to a recent study, only 7% of federal employees have long-term care insurance. This means that most federal employees don’t have a plan for this and aren’t prepared if something like this was to happen.

The costs of long-term care can be very high, and they can vary based on where you’re located in the country. According to the Genworth Cost of Care Survey, the average cost of a private room in a nursing home was $105,850 per year in 2020. Many people aren’t prepared for this sort of thing, and many people can’t afford to pay for this sort of thing down the road.

Solution 1: Long-Term Care Insurance

Long-term care insurance is one solution to this problem. With long-term care insurance, you pay a premium to an insurance company, and in return, the insurance company agrees to cover the costs of long-term care (up to a point) if you need it.

The biggest advantage of long-term care insurance is that you can transfer a good chunk of your risk to the insurance company. This means that you won’t have to worry about paying for long-term care out of pocket, which can be a huge relief for many people.

However, there are also some disadvantages to long-term care insurance. For one, it’s expensive. The price of long-term care insurance has historically gone up over time, making it harder for some people to afford it. Additionally, there is usually an elimination period during which you don’t get any benefits. This means that you’ll need to have enough money saved to cover your long-term care expenses during this time.

Solution 2: Self-Insuring

Another option is to self-insure. This means that you set aside money to cover the costs of long-term care if you need it. You can earmark a piece of your money to cover long-term care expenses one day, or you can earmark things like home equity or TSP to cover the costs if you need it one day.

If you choose to self-insure then you can save thousands and thousands of dollars in long-term care insurance premiums. However, the downside is that you’re taking on all of the risk yourself. 

Rules of Thumb for Choosing Insurance or Self-Insuring

So, which option is best for you? Here are some rules of thumb to keep in mind:

  • If you have plenty of money, you probably should self-insure. You’ll have the resources to cover the costs of long-term care if you need it, and you won’t have to worry about paying expensive premiums for long-term care insurance.
  • If you’re really poor, then you probably can’t afford long-term care insurance. In this case, government programs like Medicaid may be your best option for covering the costs of long-term care.
  • If you’re in that middle range where you have some resources but not enough to comfortably self-insure, long-term care insurance may be a good option. This way, you won’t have to worry about paying for long-term care out of pocket, but you also won’t be taking on all of the risk yourself.

Ultimately, the best option for you will depend on your situation. You’ll need to weigh the costs and benefits of each option and choose the one that makes the most sense for you and your family.


Long-term care is a reality that many of us will have to face as we get older. While it can be expensive, there are options available to help you prepare for this eventuality. Long-term care insurance and self-insuring are two popular options to consider, each with its advantages and disadvantages. By understanding these options and taking steps to prepare for long-term care, you can ensure you’re ready for whatever the future may hold.

Frequently Asked Questions

What is long-term care insurance?

Long-term care insurance is a type of insurance that covers the costs of long-term care, such as nursing home care, assisted living, and in-home care.

Who needs long-term care insurance?

Anyone who is concerned about the costs of long-term care in the future may want to consider long-term care insurance. This can be especially important for those who don’t have a lot of resources to cover the costs of care.

What are the benefits of self-insurance for long-term care?

Self-insuring can be a good option for those who have enough resources to cover the costs of long-term care if they need it. It can also save money on expensive long-term care insurance premiums.

What are the disadvantages of self-insuring for long-term care?

The biggest disadvantage of self-insuring is that you’re taking on all of the risk yourself. If you end up needing long-term care, you’ll need to pay for it out of pocket.

How can I decide whether to choose long-term care insurance or self-insuring?

You’ll need to weigh the costs and benefits of each option and choose the one that makes the most sense for your individual situation. It’s also a good idea to consult with a financial advisor to help you make the best decision.

About the Author

Dallen Haws is a Financial Advisor who is dedicated to helping federal employees live their best life and plan an incredible retirement. He hosts a podcast and YouTube channel all about federal benefits and retirement. You can learn more about him at Haws Federal Advisors.