When it comes to long-term care coverage, even a small amount can provide a great benefit.
Not everyone has the need for a large amount of coverage, but that doesn’t mean you should forgo it altogether. Even having a small amount of coverage in place as part of an overall strategy can help cover some costs, give you access to valuable features, and help reduce the financial, emotional, and physical burden on you and your loved ones often associated with long-term care.
Here, we’ll take a closer look at the ins and outs of long-term care insurance, why it’s important for CPAs, and what you need to know to choose a policy to meet your healthcare needs for many years to come.
What is Long-Term Care Insurance and Why Does it Matter for CPAs?
Americans are aging. As life expectancy grows longer and Baby Boomers—one of the largest generations—reach retirement age, the need for long-term care is only going to rise. And yet, only 7 million Americans are covered by long-term care insurance (LTCI). As the annual cost of nursing home care surpasses $125K, the need for LTCI becomes more apparent.
Long-term care insurance offers coverage for older adults who require assistance with the activities of daily living (ADLs) such as dressing, bathing, eating, and so on. It is also used for elderly people with Alzheimer’s disease or other forms of dementia and cognitive impairment. Long-term care services can be provided in many different settings, from in-home care and adult daycares to nursing homes and assisted living facilities.
Most Americans will need some type of long-term care during their lifetime,[1] so it makes sense to have a strategy in place so that you are prepared if the need arises. Many adults prefer to stay in their home as they age, so having some coverage that can help provide even a few hours of home or informal care per week can make a difference for you and your loved ones. Today, 90 percent of those receiving long-term care live at home or in a community setting [2] and advances in technology will continue to help Americans age in place.
Policy Types: Standalone vs. Hybrid LTC Options
When it comes to long-term care coverage, there are two policy types:
- Traditional or standalone LTCI: This type of policy is not attached to any other insurance plan, and generally provides the most robust long-term care benefits. Traditional long-term care insurance policies are often more cost-effective and offer more flexibility and customization. However, these policies are “use-it-or-lose-it,” so there is no payout or return if they go unused.
- Hybrid LTCI: This type of policy bundles long-term care coverage with a life insurance policy or an annuity. The upside of a hybrid plan is that there is a return, whether it’s care coverage or a death benefit if LTC isn’t needed. The downside is that hybrid policies typically have higher upfront costs and usually don’t cover as much as standalone plans.
Many Americans believe they can rely on their health insurance, Medicare, or Medicaid to cover their long-term care needs. However, health insurance policies and Medicare will not cover activities of daily living assistance. Medicare may cover short-term stays in skilled nursing facilities, but only if it happens after a qualifying hospital visit. Medicaid can provide some coverage, but only in approved facilities. With these considerations in mind, it typically makes sense for most Americans to carry either a standalone or hybrid LTCI policy.
Long-Term Care Insurance Costs and Premium Factors
The cost of long-term care plans varies widely depending on who is getting the coverage, how long the policy extends, and how much it covers. There are many factors that will impact your individual policy premiums. These factors include:
- Age: This is the top factor in determining what you’ll pay for LTCI coverage. Older applicants generally pay higher premiums and may even get denied.
- Medical history: Insurers will take into consideration any health conditions or chronic illnesses you have before determining your premiums.
- Marital status: If a married couple applies together, they may be eligible for discounts or lower premiums.
- Location: Residents of large urban areas are usually subject to higher premiums than those in locations with a lower cost of living.
- Policy details: Factors like the type of policy, length of benefit period, and coverage limits all play a role in calculating your premiums.
- Waiting periods: You can choose to reduce your policy’s waiting period (the time before your benefits kick in), but it will likely raise your premium.
- Inflation: Some policies offer a rider that adjusts your benefits based on inflation. However, adding this rider will also raise your premium.
Tax Benefits and Deductibility of LTC Premiums
Your long-term care coverage may be tax-deductible, depending on the policy type and your age. To qualify, you must have an eligible LTCI plan, and your total premiums plus long-term care expenses must exceed 7.5% of your adjusted gross income. If you meet this criterion, you can then deduct a portion of your premium costs. According to the IRS, In 2025, the deductible amount was up to $6,020 for individuals 70 and older, and $480 for individuals under the age of 40. Other eligible individuals will have a deduction somewhere in the middle.
Choosing a tax-qualified LTCI policy can be one way to offset your costs while carrying the coverage you need.
Long-Term Care Insurance Use Cases for CPAs
Why does long-term care coverage matter to CPAs? As financially-savvy professionals, you likely want to make smart decisions with your money. Choosing an LTCI policy could help you protect your assets now, and the legacy you’ll leave to family members and loved ones down the road. Here are some LTCI use cases as they apply to CPAs:
- A 52-year-old CPA managing partner has accumulated $2.8 million in retirement accounts, real estate, and investment portfolios, but is concerned that long-term care costs could deplete the assets he’s built over decades. By purchasing a standalone LTCI policy with $6,000/month benefits, he protects his entire portfolio from catastrophic care expenses while preserving the legacy intended for his children. The policy prevents the Medicaid “spend-down” requirement and ensures benefits are paid tax-free, allowing his estate planning goals to remain intact.
- A 45-year-old senior tax manager with $580,000 in retirement accounts understands that needing long-term care could necessitate early withdrawal from her 401(k) and IRAs, triggering income taxes, potential penalties, and derailing compounding growth. By purchasing a long-term care policy at a younger age and in good health, she ensures her tax-advantaged retirement accounts can continue growing uninterrupted while care costs are covered by tax-qualified policy benefits.
- A 58-year-old CPA firm owner earning $425,000 annually can structure her C-corp to pay LTCI premiums as a fully deductible business expense, reducing corporate tax liability while she receives the coverage personally without it counting as taxable income. This strategy provides superior tax treatment compared to taking an equivalent salary increase, and any future benefits paid for long-term care will be completely tax-free, creating a powerful tax-advantaged planning tool that also protects her $1.5 million business from forced sale to fund care costs.
Learn More About LTCI Coverage
It’s never too soon to start planning for the future. When you’re ready to buy long-term care insurance, we’re ready to help. We can connect you with the right policy to meet your needs, and ensure you’re protected in both your professional life and your personal life. To learn more about LTCI plans in your state, download the free guide and get started!
Long-Term Care Insurance FAQs
Have more questions about why and how to purchase long-term care insurance? We’ve got answers:
When should a CPA consider LTC insurance?
The ideal time to purchase LTCI is in your mid-40s to mid-50s, as your premiums are likely to be significantly lower and you’re more likely to qualify with favorable health ratings. However, CPAs should consider coverage whenever they have substantial assets to protect, are maximizing retirement contributions, and want to preserve wealth for retirement or legacy planning. Waiting until your 60s often means higher premiums and potential health issues that could make coverage unaffordable or make you ineligible. As financial professionals, CPAs should integrate LTCI into their overall retirement and tax planning strategy earlier rather than later.
What disqualifies you from LTC coverage?
Common disqualifications from LTC coverage include pre-existing conditions such as Alzheimer’s disease, dementia, Parkinson’s disease, multiple sclerosis, or recent stroke. Insurers also typically deny coverage for active cancer treatment, severe heart conditions, insulin-dependent diabetes, cognitive impairment, and conditions that require assistance with activities of daily living. Additionally, a history of substance use, mental health conditions, or use of mobility aids could affect your eligibility. Each insurer has different underwriting standards, so working with an experienced agent is essential.
How much long-term care coverage is enough?
Coverage needs vary significantly based on location and health status, but CPAs should consider policies providing $4,000-$7,000 monthly benefits ($150-$250 daily), which cover average costs for assisted living or in-home care in a majority of U.S. markets. A benefit period of 3-5 years covers the average length of care needed, though some policyholders prefer shorter periods with higher daily benefits. You may want to add inflation protection to ensure benefits keep pace with rising costs. To decide on your coverage level, evaluate your retirement assets and determine what you could pay annually without depleting your wealth, then look for LTCI policies that would bridge that gap.
What does a typical long-term care insurance policy cover?
Standard LTCI policies cover a range of care settings and services, including nursing home care, assisted living facilities, adult daycare, and in-home care from professional caregivers or home health aides. Coverage typically activates when you cannot perform two or more activities of daily living or require supervision due to cognitive impairment. Most policies also cover care coordination services, caregiver training for family members, modifications to your home, and respite care to provide relief for loved ones. Benefits are generally paid at reimbursement for actual expenses or as a cash indemnity benefit, giving you flexibility in how and where you receive care.
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1 "How much care will you need?" US Department of Health and Human Services, February 18, 2020.
2 Edem Hado and Harriet Komisar, “Long-Term Services and Supports,” AARP Public Policy Institute, August 2019.