5 Good Reasons Not to Get Long Term Care Insurance

Long-term care insurance isn’t right for everyone. In fact, there are some situations where it might not make sense at all. We’re covering five reasons why you might not need long-term care insurance at all. If any of these reasons fit your life, you might actually be better off without a policy. Do you already have a policy that’s starting to feel like a burden? If so, learn how to reduce the costs without completely walking away.

Quick Overview | What Is Long-Term Care Insurance?

Long-term care insurance is a type of insurance designed to help cover the cost of care when someone can no longer perform everyday activities independently due to aging, illness, cognitive decline, or disability.

Long-term care insurance typically helps pay for:

Home health aides
Assisted living facilities
Skilled nursing care
Memory care
Adult day care
In-home support for daily tasks

Coverage usually begins when a person can’t perform at least two out of six activities of daily living, like bathing, dressing, eating, using the restroom, moving around, or managing continence.

This option isn’t always right for everyone. Get advice from an advisor if you’re unsure about your financial future. Let’s walk through five real reasons why long-term care insurance might not be a good fit, and the options you have if you already own a policy.

Reason #1. You Care More About Living Well Today Than Leaving a Big Inheritance

Is long-term care insurance worth it if leaving money behind isn’t a major priority for you? It might not be. If a large inheritance isn’t a priority, your financial decisions don’t have to revolve around preserving capital. Instead of locking thousands of dollars a year into long-term care insurance premiums you may never benefit from, it might be more important to keep your resources flexible so you can enjoy life while you’re healthy.

Would you rather spend $5,000 a year on insurance or on something you know you’ll enjoy? Some retirees would prefer to travel now or make long-lasting memories, like taking a cooking class in Tuscany. For many people, the answer is simple. If your focus is living well today rather than stretching your wealth across the next generation, that alone is a valid reason to rethink long-term care insurance.

Reason #2: You Already Have a Strong Support Network

Another reason long-term care insurance might not be necessary is if you already have a strong support system. If you have a spouse, children, or close family members who are willing and able to help with care (even just in the beginning), you may rely less on paid long-term care services than you think.

Of course, no one wants to become a burden. However, families who openly discuss care preferences tend to make more thoughtful decisions and avoid unnecessary institutional care. The opposite is also true. Without planning or communication, long-term care can become chaotic and expensive. Loved ones may feel forced into quick, emotionally driven decisions that cost more than necessary. Planning ahead doesn’t eliminate the need for support, but it can make everything a lot more manageable.

Reason #3: You’re Comfortable Using Medicaid

Medicaid can be a viable safety net for some households. But this depends heavily on where you live, because Medicaid benefits and facility quality vary by state. According to the AARP Long-Term Services and Supports Scorecard, several states actually have highly rated facilities that accept Medicaid. If you live in one of those states (or plan to retire there), Medicaid may be a more viable option than you realize.

Top States for Long-Term Services & Supports

Minnesota
1

Washington
2

Wisconsin
3

Massachusetts
4

Colorado
5

Oregon
6

New York
7

Vermont
8

Rhode Island
9

Hawaii
10

If you qualify for Medicaid, it’s possible that long-term care could cost you little to nothing out of pocket. And for people who have already taken steps to protect certain assets, Medicaid can act as a reasonable part of an overall long-term care plan.

Reason #4. You Have Enough Assets to Self-Insure

This is one of the most straightforward reasons people skip long-term care insurance. If you have enough money to cover the potential costs, you might not need it. Here’s a look at the numbers to help this make sense.

According to the Department of Health and Human Services:

The average man needs 2.2 years of long-term care.
The average woman needs 3.7 years.

Today, a private room in a skilled nursing facility costs around $120,000 per year, depending on location. If you grow that cost at a conservative 4 percent annually, that same room could cost $250,000 per year twenty years from now.

So, what does that look like in total?

A man: 2.2 years × $250,000 = $550,000
A woman: 3.7 years × $250,000 = $925,000
A couple: $550,000 + $925,000 = $1,475,000

Say you have $2 million invested. You’re withdrawing $75,000 a year, adjusted for inflation, and your portfolio grows at a moderate 5 percent annually. After 20 years, even with those withdrawals, you’d still have over $2.2 million. That’s enough to cover the $1.475 M worst-case care scenario, which still leaves over half a million in assets, and that’s without selling your home.

Tip: Here’s something many people forget. If both spouses are in full-time care, many living expenses disappear, like home maintenance, utilities, travel, dining out, and general household costs. Plus, selling your home can be a major liquidity event if you choose to do so.

Reason #5. The Math Just Doesn’t Add Up for You

Sometimes long-term care insurance just doesn’t make mathematical sense for your situation. Say your long-term care premium is $5,000 per year. Over 20 years, you’ll spend $100,000. A typical policy might cover around $225,000 in total lifetime care. If you need care, great, you technically “profit” about $125,000 over what you paid. But there’s a catch. If you never need care, that $100,000 is gone forever.

Now compare that with investing the same $5,000 each year. At a conservative 5 percent annual return, you could have around $165,000 after 20 years.

Now the question becomes. Would you rather:

Spend $100,000 to maybe get $225,000
Or
Invest the money and potentially end up with $165,000?

In this scenario, you’re spending $100,000 to protect just an extra $60,000 of potential risk, and only if you end up needing care. For some people, that trade-off makes perfect sense. For others, it’s simply not worth it.

What If You Already Have a Policy — but the Premiums Feel Like Too Much?

If you already have a long-term care insurance policy, you usually have more flexibility than you think. Your provider may be willing to help you adjust the policy so the premiums are more manageable without losing all your coverage. If the premiums are becoming a burden but you’re not ready to walk away completely, you can adjust the policy rather than cancel it. Here are several changes your insurer may allow.

Increase the elimination period

This is the waiting period before benefits start. A longer waiting period usually means a lower premium.

Reduce the daily or monthly benefit

If you don’t need top-tier coverage, lowering the benefit amount can make your policy far more affordable.

Reduce the total lifetime benefit

You can keep some protection without paying for the maximum payout.

Scale back optional riders

Inflation riders and death benefit riders can significantly increase premiums. Removing or reducing these features can make a policy much more affordable.

Ask about a buyout offer

If you’ve had your policy for a long time, some insurers will make a buyout offer. This is a lump sum payment in exchange for canceling the policy. It isn’t always the best option, but it’s worth asking about if premiums are becoming too heavy.

Tip: You don’t have to choose between keeping your expensive policy and canceling it. There is usually a middle ground. You just have to start the conversation with your insurer about long-term care insurance that fits your lifestyle.

What This Means for Your Long-Term Plan

Long-term care insurance works beautifully for some families and makes far less sense for others. The key is understanding where you stand. A financial advisor in Atlanta can help. If you’d like help reviewing your current situation or planning your financial future, contact Paces Ferry Wealth Advisors to schedule a call.

Paces Ferry Wealth Advisors, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”). This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.

Zachary Morris, CFP®

Having traveled to over 35 countries, Zach is a believer in Ralph Waldo Emerson’s statement that Life is about the journey, not the destination. Being a CERTIFIED FINANCIAL PLANNER™ provides Zach the opportunity to help clients define and realize their journey, and co-founding Paces Ferry Wealth Advisors, an independent firm, allows the freedom to define the client experience along the way.