The Changing Landscape Of Long-Term-Care Insurance
[Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.]
As many people enter their pre-retirement years, life insurance as pure income replacement often becomes less critical. Mortgages may be paid off, savings may be substantial, and living expenses may be lower. However, a chronic long-term care event can quickly drain retirement assets, especially if one spouse needs care early and the other lives much longer. About 70% of individuals who reach age 65 will need some form of long-term care, though the duration varies widely. While some need care briefly, nearly 30% will require it for more than five years. Costs can be substantial, with average home healthcare exceeding $77,000 per year in 2024 and private facility care topping $127,000 annually. When families cannot afford these expenses, care often falls to unpaid family members and Medicaid after assets are spent down.
The financial burden is only part of the picture. Caregiving frequently brings significant emotional and physical strain. Research from AARP shows that a majority of caregivers experience high stress, physical exhaustion, and social isolation. Family relationships can also suffer, particularly when responsibilities or financial support feel unevenly distributed. For families with the means to plan ahead, the challenge becomes how to fund care efficiently without sacrificing long-term investment goals. Holding large amounts of low-risk, liquid assets can reduce portfolio returns, but failing to plan can leave families exposed to major financial and personal disruption.
Insurance has evolved to address this risk, though each approach has tradeoffs. Traditional stand-alone long-term care policies can provide tax-free benefits but often involve rising premiums and no residual value if care is never needed. Asset-based long-term care policies offer guaranteed premiums and a death benefit, but frequently use that death benefit first, leaving little for heirs if care is short in duration. Life insurance with a long-term care or chronic illness rider offers a simpler structure by using a single death benefit that can be partially accelerated for care, with any unused amount passing tax-free to beneficiaries. Still, no insurance product alone constitutes a full care plan. Families must also consider where care would be provided, who would manage it, how assets would be used, and what legal documents are in place to ensure decisions can be made if capacity is lost.
For more information see Jacob Kujala “The Changing Landscape Of Long-Term-Care Insurance,” Financial Advisor, November 20, 2025.