News and Commentary

Assessing Long Term Care Insurance Options by Scott Montgomery

When most people think of retirement, they imagine spending their time traveling and pursuing hobbies and activities that bring them joy. Few consider that as life expectancies increase, so too do the risks that individuals will eventually require costly long-term care for assistance with daily living activities. By failing to prepare in advance of this reality, there is a high probability that you will run out of resources to manage and finance your long-term care in the future.

According to the most recent studies, living longer has its advantages but it also increases the likelihood you will need long-term care (LTC), which gets more and more expensive with each passing year. For example, in 2021, the annual national median cost of receiving care in an assisted living facility increased 4.65 percent to $54,000, whereas the national median cost of a home health aide increased 12.5 percent to more than $61,000 for the year. For a private room in a skilled nursing home, the median annual costs in 2021 reached $108,405. It is important to note that Medicare covers only a limited number of days in a nursing home and similarly restricts approval of costs for in-home care. The best way to prepare for these rising expenses and ensure you continue to have a say in the care you receive, allocate proper time to budgeting and investigating the changing landscape of long-term care insurance options.

When Should You Get Insured?

 When you should begin thinking about long-term care insurance depends on your lifestyle and your genetics. In general, the annual cost for an LTC policy increases as you age. The longer you wait to get insured, the more likely you will have a medical condition that may make it more difficult to secure coverage. On the other hand, the younger you are, the more premiums you will pay over your lifetime. In most instances, it is prudent to begin thinking about long-term care when you turn 50 years old.

What LTC Policy Options are Available to You?

The two basic types of long-term care insurance are annual pay and asset-based policies.

With an annual pay policy, you pay annual premiums with the expectation that you will receive benefits to meet your anticipated needs in the amount and for time outlined in your policy. Under certain circumstances, you may be able to deduct a portion of those premiums from your taxes. Consult with an experienced tax advisor who understands your unique situation.

If you pass away before using any benefits of an annual pay LTC policy, you generally will forfeit the premiums you paid into the plan unless you add a nonforfeiture benefit rider that provides you or your beneficiaries with a partial refund of premiums should the policy lapse. However, this partial refund guarantee comes with the cost of higher annual premiums.

With an asset-based long-term care policy that does not pay out benefits during an individual’s lifetime, policyholders receive a refund of their initial payments. These hybrid annuity and life-insurance-based plans require you to make one or more upfront premium payments, typically of substantial value, which are invested in life insurance or annuity contracts that pay a guaranteed rate of return. When long-term care is needed, you may access the life insurance death benefit or annuity value free of income taxes to pay for qualifying expenses. Should policyholders pass away without incurring long-term care expenses, the full death benefits may ultimately be returned to their heirs. If policyholders surrender LTC insurance policies, they may get back a substantial portion of the initial payments they paid into the plan.

As the long-term care insurance industry continues to evolve, new products are constantly being introduced to better meet the needs of an aging population. While these policies may not be available or appropriate for everyone, it is critical that you discuss with family members and/or advisors how you wish to be cared for, who you would want to oversee and deliver the care you need, and how can you fund that care when you need it. The guidance of an experienced financial advisor is a good way to start the conversation and review the pros and cons of all the long-term care options available to you.

About the Author: Scott Montgomery is a director and financial planner with Provenance Wealth Advisors (PWA), an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs and a registered representative with PWA Securities, LLC. He can be reached at the firm’s Ft. Lauderdale, Fla. office at (954) 712-8888 or

Provenance Wealth Advisors (PWA), 200 E. Las Olas Blvd., 19th Floor, Ft. Lauderdale, Fla. 33301 (954) 712-8888.

Scott Montgomery is a registered representative of and offers securities through PWA Securities, LLC, Member FINRA/SIPC.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

Any opinions are those of the advisors of PWA and not necessarily those of PWA Securities, LLC. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of PWAS, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Prior to making any investment decision, please consult with your financial advisor about your individual situation.

Investments mentioned may not be suitable for all investors. Life insurance and long-term care insurance policies have exclusions and/or limitations. The cost and availability of life insurance and long-term care insurance depend on factors such as age, health, and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of life insurance and long-term care insurance. Life insurance policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Guarantees are based on the claims-paying ability of the insurance company.

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Update on March 15, 2024