A 60-Year-Old Pays ~$1,900/Year for $165K of Long-Term Care Coverage — Does It Beat Self-Funding?
We priced a real 2025 reference policy and ran it against the alternative: investing the same premium dollars instead of buying coverage. The 2025 AALTCI Price Index shows a 60-year-old woman paying roughly $1,900/year for a $165,000 benefit, no inflation rider. The question this raises isn’t whether the premium is “worth it” in the abstract — it’s which path covers more months of care by the time you’d actually need it.
Two paths to the same future cost
Path A: Buy the policy. Pay a fixed annual premium every year until care is needed. The policy then pays its benefit toward care costs, regardless of how markets performed in the meantime.
Path B: Self-fund. Invest what would have been the premium instead. If and when care is needed, pay out of pocket — and out of the resulting portfolio.
Neither path is free of risk. The insurance path carries the risk of paying premiums for years (or decades) and possibly lapsing the policy before ever filing a claim — a meaningful share of LTC policyholders do exactly this. The self-fund path carries the risk of needing care earlier than expected, before the invested premium has had time to compound into something large enough to matter.
What the premiums actually look like by age
| Age | Male (annual) | Female (annual) |
|---|---|---|
| 55 | $950 | $1,500 |
| 60 | $1,200 | $1,900 |
| 70 | $3,295 | $5,100 |
| 75 | $5,713 | $9,488 |
Source: American Association for Long-Term Care Insurance (AALTCI) 2025 Price Index, for a $165,000 benefit, no inflation rider, single-life policy.
The roughly 3x increase from age 55 to 70 is the core tension in the “when should I buy” question. Buying young locks in a cheap premium for coverage that’s decades away — meaning years of premiums paid before any chance of a claim. Buying old gets expensive fast, but for coverage you may need soon.
Running the break-even
The math is a straightforward comparison, not a probability-weighted actuarial model: if you need N months of care starting in Y years, which path leaves you better off?
- Months covered by the policy = policy benefit ÷ monthly cost of the care you’d need. At $165,000 benefit and, say, $5,900/month for assisted living, that’s about 28 months of coverage — a little over 2 years.
- Months covered by self-funding = the same premium, invested monthly at your assumed return, compounded over the years before care starts, divided by the same monthly care cost.
The self-fund path’s advantage grows the longer premiums are paid before care starts (more time to compound) and shrinks or reverses if care starts soon after the decision is made. There’s no universal answer — it depends on your specific age, premium quote, and how many years you realistically expect before needing care.
Where this calculation breaks
- Premiums often rise over time. Many LTC policies carry re-rate risk — insurers have raised in-force premiums industry-wide over the past decade. A flat-premium assumption understates the true cost of an older policy.
- Policy lapse isn’t priced in. Some policyholders let coverage lapse before ever filing a claim, forfeiting premiums paid. That risk sits entirely on the insurance side of the ledger and isn’t reflected in a simple break-even.
- This ignores the probability of needing care at all. If you never need long-term care, self-funding wins by definition — you keep the invested money. The break-even only answers the question conditional on actually needing a specific number of months of care.
- Hybrid life/LTC policies aren’t the same product. Increasingly common “asset-based” LTC riders on permanent life insurance return unused premium as a death benefit — a meaningfully different risk profile than the standalone policies priced here.
What to actually do
- Get real quotes at your actual age and health class — reference premiums are a starting point, not your price.
- Get a realistic monthly cost estimate for the care type you’re actually planning for (see the elder care cost comparison below) before running the break-even.
- Run the comparison at a range of “years before care starts” assumptions — the answer is sensitive to this input more than almost anything else.
- If self-funding wins by a wide margin, make sure the earmarked money actually stays invested and isn’t quietly spent on something else before it’s needed.
- For an existing policy, ask the insurer for the current in-force premium — don’t assume the original quote still applies.
Open the LTC Insurance Break-Even Calculator → and run your own age, quote, and care-cost assumptions.