Long-Term Care Insurance: Does It Actually Pay Off?

Two ways to fund the same future cost

We priced a real 2025 reference policy: a 60-year-old woman paying $1,900/year for a $165,000 benefit, no inflation rider. Buy the policy and you're covered for a fixed number of months once care starts, regardless of how the market does in the meantime. Skip it and invest the same $1,900/year instead, and you're betting that market growth outpaces what the insurer would have paid out — while carrying 100% of the downside if care starts early or markets underperform.

The AALTCI's 2025 Price Index shows premiums roughly triple from age 55 to age 70 for the same benefit — insurers price in the shrinking window before a claim. That's the core tension this tool surfaces: buying young locks in a cheap premium for coverage decades away; buying old gets expensive fast for coverage you may need soon.

How the math works

1. Total premiums paid = annual premium × years paying before care starts.
2. Months covered by the policy = policy benefit ÷ monthly cost of the care you'd actually need.
3. Self-fund value at care start = the same annual premium, invested monthly instead, compounded at your assumed return over the same years.
4. Months covered by self-funding = self-fund value ÷ monthly care cost.
5. The path covering more months of care at your target monthly cost wins.

Source: American Association for Long-Term Care Insurance (AALTCI) 2025 Price Index, reference premiums for a $165,000 benefit, no inflation rider, single-life policy.

Math runs locally. Inputs never leave your browser.Source on github.

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. This tool assumes a flat premium, which understates the insurance path's true cost for older policies.
• Policy lapse isn't modeled.A meaningful share of LTC policyholders lapse before ever filing a claim, forfeiting premiums paid with no benefit. That risk isn't priced into the "insurance" side here.
• 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 here only answers the question conditional on actually needing N months of care.
• Hybrid life/LTC policies aren't modeled.Increasingly common "asset-based" LTC riders on permanent life insurance return unused premium as a death benefit — a meaningfully different risk profile than a standalone LTC policy.

What to actually do

1. Get real quotes at your actual age and health class — the reference premiums here are a starting point, not your price.
2. Use the Elder Care Cost tool first to get a realistic monthly-cost number for the care type you're planning for.
3. Run this tool at a range of "years paying before care" assumptions — the answer is sensitive to how soon you actually expect to need care.
4. If self-funding wins by a wide margin, make sure the money is actually earmarked and won't get spent on something else before care is needed.
5. For a policy that's already years old, ask your insurer for the current in-force premium — don't assume today's reference rate still applies.