Long-Term Care Insurance: What You Need to Know

Long-term care insurance helps pay for hands-on, day-to-day care: help with bathing, dressing, eating, and getting in and out of a bed or chair.1 Medicare doesn't pay for that kind of ongoing custodial care, and traditional health insurance isn't designed to cover it.2 A policy can fill the gap, but most individual policies require medical underwriting, so you have to buy while you're healthy enough to qualify.1

This guide covers what these policies cover, how they work, the tax breaks, the partnership programs that protect your assets, and whether one makes sense for you.

What Long-Term Care Insurance Covers

Most long-term care isn't medical treatment. Non-skilled, hands-on help with activities of daily living makes up the majority of long-term care services.1

Long-term care insurance is private insurance built to cover that personal and custodial care across settings: in your own home, through a community organization, or in a facility.1 That's the point of it. Coverage isn't tied to a single setting.

The gap it fills

It's easy to assume Medicare or your health plan will cover long-term care. For ongoing personal care, neither will.

Medicare Part A pays for skilled nursing only on a short-term basis after a hospital stay, and the entry conditions are narrow: an inpatient stay of at least three consecutive days, entry to a Medicare-certified skilled nursing facility within a short time (generally 30 days) of leaving the hospital, and a need for skilled services related to that stay, for up to 100 days per benefit period and never for custodial help.2 Time under observation or in the emergency room doesn't count toward the three days, but falling short isn't automatically a denial. Medicare names a waiver (through an approved Accountable Care Organization or a Medicare Advantage plan), a 30-day re-entry rule, and other settings or programs that may cover the care. It also names an appeal when a hospital switches you from inpatient to outpatient getting observation services: a fast appeal while you're still in the hospital is open, but new appeals of past stays closed on January 2, 2026, unless you show good cause for filing late. How families pay for nursing home care works through each route.2 After day 100, Medicare pays nothing, and it doesn't pay for ongoing custodial care at all. Traditional health insurance isn't designed to cover it either.1

That leaves families paying privately, qualifying for Medicaid if they meet their state's eligibility rules, using VA benefits, or buying a long-term care insurance policy.2 Insurance is the option that lets you protect your savings instead of draining them.

When a policy starts paying

A policy doesn't pay just because you're old or in a facility. It pays when you hit a benefit trigger.

Most policies pay when you need help with two or more of six activities of daily living (ADLs), or when you have a cognitive impairment.1 The six activities are set in federal law (26 USC § 7702B): eating, toileting, transferring, bathing, dressing, and continence. For a tax-qualified policy, the bar is higher. A licensed health care practitioner must certify that you can't do at least two of those activities without substantial help for at least 90 days, or that you need substantial supervision to stay safe because of severe cognitive impairment. A dementia diagnosis alone doesn't meet it, and the certification has to be from within the past 12 months.1 You don't declare the trigger yourself. The insurer decides, usually through an assessment by a nurse and social worker team, and its care manager then approves a plan of care.1

How a Long-Term Care Insurance Policy Works

You don't buy a long-term care policy off the shelf. You build it from four choices. The price depends on your age when you buy, the daily maximum, how many years the policy will pay, and optional extras such as inflation protection.1

Elimination period. This is the waiting period: the time that must pass after you meet a benefit trigger before the policy starts paying for services. Most policies let you choose 30, 60, or 90 days, and you cover the cost of any care you get during that wait. Some policies count the wait only on days you receive paid care, so unpaid family care may not count toward it.1

Benefit amount. This is a limit you pick when you buy, set as a daily or monthly amount. Most policies pay your costs up to that daily limit until the lifetime maximum is reached.1 If your daily benefit is below what care actually costs, you pay the difference. Some policies instead pay a set cash amount for each day you meet the benefit trigger, whether or not you get paid care that day. These cash policies are more flexible but can cost more.1

Benefit period. This is how long the policy keeps paying, or the lifetime maximum it will pay in total. Some policies pay for two to five years, others for as long as you live, but very few have no limit at all.1 A longer benefit period costs more.

Inflation protection. This optional feature increases your benefit over time.1 Care costs climb over time: the Federal Long Term Care Insurance Program puts a year in a semi-private nursing home room at $112,420 in its 2024 survey and projects that same year could reach almost $186,000 in 20 years.3 Without inflation protection, a benefit you bought decades ago may cover far less by the time you need it.

Here's why these levers matter. In the CareScout 2025 Cost of Care Survey, the most recent national data, the median semi-private nursing home room ran about $315 a day, or about $114,975 a year, and assisted living about $6,200 a month.3 A policy with a low daily benefit and no inflation protection can leave a wide gap against those numbers.

One more thing to know before you apply: most individual policies require medical underwriting.1 Applicants in poor health or already receiving long-term care services may not qualify. In some cases a limited amount of coverage, or coverage at a higher non-standard rate, is available, and some group policies don't require underwriting. The insurer may also raise the premium on your policy after you buy it.1 Buy too late or wait until you're sick, and the door may already be closed.

The Tax Advantages

A tax-qualified long-term care policy carries federal tax advantages. Two of them have dollar figures the IRS re-indexes every year, and both are narrower than they first look. The premium break also has a second route that's easy to miss.4

Per-diem benefits aren't taxed, but the limit isn't a flat daily cap. If your policy pays on a per-diem (indemnity) basis, those benefits are excluded from your income up to the per diem limitation, and any excess is includible in gross income. That limitation is the greater of an indexed dollar amount, $430 a day for 2026, or the costs actually incurred for qualified long-term care for the period, reduced by amounts received as reimbursement. So $430 only binds when the policy pays more per day than the care actually costs: if your mother's nursing home runs $500 a day and her policy pays $500 a day, nothing is taxable.4 One carve-out runs further in the family's favor. A payment treated under section 101(g) as paid by reason of death is not counted toward that aggregate if the insured is a terminally ill individual when the payment is received.4

Premiums count as medical care, up to age-banded limits, and counting is not the same as deducting. Eligible long-term care premiums count as an expense for medical care, but only up to an annual limit that rises with your age. The medical-expense deduction itself is an itemized deduction claimed on Schedule A (Form 1040), and it reaches only the part of your medical and dental expenses that exceeds 7.5 percent of adjusted gross income. So a taxpayer who takes the standard deduction, or whose total medical expenses stay under that floor, deducts none of the premium by that route.4 For those who itemize and clear the floor, the 2026 limits are:

These limits are indexed and change each year.4 By the itemized route, the deduction is worth the most to older policyholders with high premiums who itemize and have enough medical expenses to clear the 7.5 percent floor.

The second route requires no itemizing at all. If you were self-employed and had a net profit for the year, you may be able to deduct amounts paid for health insurance, which IRS Publication 502 says includes qualified long-term care insurance, as an adjustment to income on Form 1040 or 1040-SR rather than on Schedule A. Publication 502 treats you as self-employed for this purpose if you were a general partner, a limited partner receiving guaranteed payments, or someone who received wages from an S corporation in which you were more than a 2% shareholder. Three conditions ride with it: the insurance plan must be established under the trade or business; the deduction can't be more than your earned income from that trade or business; and no deduction is allowed for a qualified long-term care contract for any month you were eligible to participate in a long-term care plan subsidized by your own or your spouse's employer. If you itemize and don't claim 100% of your self-employed health insurance costs on Form 1040 or 1040-SR, the remaining premiums go with your other medical expenses on Schedule A, subject to the same 7.5% limit.4 Publication 502 does not say whether the age-banded limits in the table also cap this route; it sends long-term-care-premium filers to Form 7206 instead. Treat the table as the itemized route's ceiling and ask your preparer about the other one.4

One product to watch. No deduction is allowed at all for a premium paid as a charge against the cash surrender value of a life insurance contract or the cash value of an annuity contract. If a policy's long-term care charges come out of a life insurance or annuity contract's cash value, that portion earns no deduction, so check how yours is paid before you plan around one.4

Partnership Policies: Protecting Assets From Medicaid

This feature is easy to overlook, and it can be the most valuable one.

A Long-Term Care Partnership policy links your insurance to Medicaid. It is a state option, not a national entitlement. Section 6021 of the Deficit Reduction Act of 2005 provides that States may establish these partnerships, and one exists only where the State has an approved Medicaid state plan amendment providing for the disregard, so confirm with your own state's Medicaid agency rather than assuming.4 Here's what it does where it exists.

Medicaid counts your assets when it decides whether you qualify. A partnership policy changes the math. In a State whose partnership was created under the 2005 expansion, an amount equal to the benefits your policy paid out is disregarded when Medicaid decides if you qualify, and again in Medicaid estate recovery.4

So if a partnership policy pays out $180,000 in benefits, Medicaid disregards an extra $180,000 of your assets when it decides whether you qualify, and that amount is shielded from estate recovery. That is dollar-for-dollar protection: a dollar of disregard for every dollar the policy actually pays out, not the policy's face amount.4

Dollar-for-dollar is not the rule everywhere, and this one cuts in your favor. CMS says States establishing new partnership programs must offer a dollar of asset disregard for every dollar paid out. The oldest programs are different, and federal law preserves them. The first four States to implement partnerships, in 1993, were California, Connecticut, Indiana and New York, and they used two different methods: three let a participant keep an amount equivalent to what the policy paid on their behalf, while the other required a more comprehensive policy and, in exchange, let participants keep all of their assets. Six States, California, Connecticut, Indiana, Iowa, Massachusetts and New York, had an approved state plan amendment as of May 14, 1993 and were grandfathered, and may continue operating as originally implemented. If you hold an original-program policy in one of those six, you may have protection for all your assets rather than a dollar-for-dollar disregard, so read your own State's program rules before you assume the federal formula applies to you.4

To be a qualified partnership policy under the 2005 expansion, the coverage must be a tax-qualified policy issued no earlier than the effective date of that State's plan amendment, which means a policy you already owned before then is not partnership-qualified. It must cover an insured who was a resident of that State when coverage first became effective. It must meet the model regulations and the requirements of the model Act. And it must carry inflation protection on a sliding scale by purchase age: compound annual inflation protection if you buy before age 61, some level of inflation protection from 61 through 75, and optional protection at 76 or older. Those are the policy-side conditions; the statute sets further requirements aimed at the State Medicaid agency, the State insurance department and the insurer.4

If you might move states, don't assume the protection travels. Section 6021(b) directed the Secretary of Health and Human Services to develop standards for uniform reciprocal recognition of partnership policies among partnership States, "in order to permit portability," under which benefits paid would be treated the same by all such States. But a State with a partnership is subject to those standards unless it notifies the Secretary in writing that it elects to be exempt, and as of the December 2008 final rule the Department still described publishing those standards as something it anticipated doing. Reciprocity is a statutory design carrying a State opt-out, not a guarantee, so anyone planning a move should confirm with the destination State's Medicaid agency.4

If you expect you might need Medicaid eventually, a partnership policy lets your insurance do double duty: it pays for care, then helps protect what's left.4 To go deeper on the spend-down side, see our guide to Medicaid planning strategies and how estate recovery works.

Who Should Consider It, and the Honest Limitations

Long-term care insurance fits some people well and makes no sense for others. Be clear-eyed about both.

It tends to make sense if you're still healthy enough to pass underwriting, with enough assets to want to protect them but not enough to comfortably self-fund years of care. That middle band is the sweet spot, and the price is set partly by how old you are when you buy.1 People with very little to protect may be eligible for long-term care through Medicaid if they meet their state's rules; the very wealthy may be able to pay privately.2

Now the limitations, because they're real.

You might not qualify. Most individual policies require medical underwriting, so applicants in poor health or already receiving long-term care services may not qualify for standard coverage.1

Premiums can rise. The insurance company may raise the premium on your policy, and your coverage depends on continuing to pay it. Before you buy, ask for the company's premium rate history. If you miss a premium, a level-premium tax-qualified policy must offer you a nonforfeiture option, such as reduced paid-up coverage or a shorter benefit period, but it is an offer you have to be given, not an automatic benefit.1

It may never pay off. If you stay healthy and never trigger benefits, you pay premiums for nothing. That's true of any insurance, but the stakes feel higher over decades.

A weak benefit can disappoint. A low daily benefit with no inflation protection can cover only a fraction of real costs by the time you need it.3 The coverage is only as good as the levers you chose at purchase.

The honest summary: it's a planning tool, not a sure thing. Bought early, structured well, and paired with the partnership feature, it can protect a family's savings. Bought late or built thin, it disappoints. If Supplemental Security Income or Medicaid is already in the picture, ask for local help before you put money into premiums.

If you or the person you're helping has Medicare, there's a free place to bring your questions. The State Health Insurance Assistance Program, or SHIP, gives free, personalized, and unbiased health insurance counseling to people with Medicare, their families, and caregivers.5 Federal law lists information regarding long-term care insurance among the health insurance information a state's SHIP plan must provide for, and the Congressional Research Service says SHIPs assist with long-term care insurance. What the law requires is information. It doesn't say a counselor will evaluate or recommend a specific policy, so bring your questions and ask what your SHIP can cover.6 Our guide to free Medicare counseling through SHIP explains what the program is and how to find yours.

Want help finding local resources before you decide? Call the Eldercare Locator, a national referral service of the federal Administration for Community Living, at 1-800-677-1116. Its trained operators can refer you to your area agency on aging or another local agency that can help.7

Learn More

Find personalized help deciding whether long-term care insurance fits your family at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.