How it works
Long-term care decisions go wrong when argued as averages; they improve sharply when argued as probabilities. Roughly half of people turning 65 will need some paid care, most claims run short, but the tail - a dementia claim stretching past five years - is the ruinous branch, and insurance exists precisely for branches. This calculator stages both routes to the same moment: premiums compounded forward at a plausible in-force increase rate until care might begin at age 83, against a self-fund pot built from monthly deposits compounding at your investment return. It then prices the scenario claim - today's daily care cost inflated across decades of care-specific inflation, multiplied through the years of the claim - and asks each route to pay it. Three comparisons fall out. Premiums sunk versus pot accumulated shows the cash each path consumes before the coin flip. The self-fund shortfall shows what the pot fails to cover in the scenario claim - the exact tail risk being transferred. And the kept-either-way figure exposes insurance's structural cost: premiums vanish if care never arrives, while the pot remains yours regardless. Middle-net-worth households - too large for Medicaid, too small to absorb a comfortable claim - are where that transfer usually prices fairly.
Formula
premiums = sum of premium x (1 + increase)^t to the care-start age | pot = FV(monthly deposit, return, years) | claim cost = daily x 365 x sum of (1 + inflation)^(years-to-care + k)
Tips
- Insure the tail, not the average - a 3-year claim is the planning case; the 8-year tail ruins plans.
- Hybrid life-LTC policies soften the sunk-premium objection by returning a death benefit if care never comes.
- The self-fund pot must be ring-fenced; a care fund raided for a kitchen is self-insurance in name only.
- Re-price both routes every five years - premiums, deposits and care inflation all drift apart quietly.
- Medicaid is the implicit backstop for small estates, with strict look-back rules on asset transfers.
Frequently asked questions
- What are the odds of needing long-term care?
- Roughly half of people reaching 65 will need some paid long-term care during life, but the distribution is skewed: many need only months of help while about one in seven claims runs beyond five years. Planning targets that tail, because a 3-year claim is absorbable and a 10-year claim is not.
- How much does a 3-year nursing home stay cost?
- At today's national averages near $320 a day, roughly $350,000 for three years - and decades of care inflation running ahead of general CPI push a claim starting in 25 years toward double that. Regional variation exceeds twofold, so local pricing beats any national average for real decisions.
- Is self-funding long-term care better than insurance?
- For large portfolios yes: earmarked, invested assets absorb even long claims while keeping every dollar if care never comes. For middle-net-worth households the self-fund shortfall in a real claim - often six figures - is exactly the risk worth transferring. Below modest estates, Medicaid becomes the de facto insurer.
- What happens to LTC premiums if I never need care?
- On traditional policies they are spent - that is how any branch-risk insurance prices itself. Hybrid life-and-LTC products answer the objection by guaranteeing a death benefit whether or not care is used, trading roughly 30% to 50% higher premiums for certainty of value either way.
- Can LTC insurance premiums increase after I buy?
- Yes. Individual policies are guaranteed renewable only per class, meaning carriers can seek approval to raise premiums across everyone holding your policy form. In-force increases of several percent compounded have been common on older blocks - which is why this calculator grows your premium stream instead of holding it flat.