Self-insurance vs. LTC Insurance: Which Works Better?


Self-insurance or long term care coverage? Those of the baby boom generation have much to ponder when it comes to their impending care needs, and they are running out of time. The fact is that baby boomers are retiring at a rapid rate. Studies show that 10,000 individuals from this age group will retire each day until at least 2030. This also translates to 10,000 people with unique needs requiring various types of health and care services. If you look at it this way, the health and long term care industries have their work cut out for them.


This brings us back to the question about coverage: which among the two works best for your situation and your budget? After all, the type of plan that your loved ones and friends choose may not work as well for you.


Understanding the Costs of Long Term Care

The costs of care services in the United States are alarming. According to Genworth’s Cost of Care Survey for 2016, the average monthly rates are as follows:

  • Homemaker Services – $3,813
  • Home Health Aide – $3,861
  • Adult Day Health Care – $1,473
  • Assisted Living Facility – $3,628
  • Private Room in a Nursing Home – $7,698
  • Semi-private Room in a Nursing Home – $6,844


Bear in mind that these costs are much higher in other states. In Massachusetts, the monthly cost of services in an assisted living facility is $5,463. In Alaska, the monthly rate of a semi-private room in a nursing home is priced at $24,333.


Furthermore, care needs are typically not fleeting. According to the US Department of Health and Human Services, women need 3.7 years of care while men need 2.2 years. On top of that, health conditions, such as Alzheimer’s disease and Parkinson’s disease, may need lifetime services.



Despite the alarming expenses ahead, many still choose self-insurance as a way to pay for the care they need. And as cited in our post about self-insurance and long term care planning, this type of coverage does have its advantages. Self-funding your retirement and long term care needs means that you do not have to tackle insurance premiums. After all, the premium costs are one of the main reasons why people back out of a policy. Moreover, this option allows you to spend the money as you please. In case of emergencies, your money is not tied to a policy.


However, this type of planning seems to work best for people with substantial assets and savings that they can fall back on in case of miscalculations. Bear in mind that long term care needs typically come during your twilight years or the time when you no longer have a substantial salary to rely on. On top of that, Social Security benefits hardly cover any care expense you might incur.


Long Term Care Insurance

Instead of self-funding for care, many choose to purchase a policy for long term care from an insurance carrier. And despite the bad press that it has received over the years, 90% of long term care insurance policyholders are satisfied with the coverage that their policies provide. On top of that, 89% of the survey respondents shared that they did not have to pay for other services outside of their policy. But bear in mind that this option, although comprehensive, requires a great deal of planning from your end to work. So this brings to the forefront the biggest question that people have about long term care insurance: is it worth it?


This type of insurance is specifically tailored to help solve the financial issues that come with needing long term care. By having the funds ready to pay for these expensive services, you will not need to sell your assets or drain your savings. On top of that, your family members are safe from the burden of becoming family caregivers in the future.


However, it is important to note that the cost of long term care insurance is also quite substantial. You will need to research on your own as well as consult with a financial advisor and an insurance specialist to prevent it from overwhelming your financial resources.


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