Affordable long-term care insurance: Tax-efficient tips to pay for it

Tips for finding affordable long-term care insurance

To reduce the cost of long-term care insurance, choose coverage that covers only a portion of the cost of care rather than the full amount, buy it with your spouse for a discount of up to 30%, purchase coverage in your 50s before health issues develop, choose a lower, 3% compound inflation protection amount and select a longer elimination (waiting) period.

Don't cover the full cost of care

One of the most effective ways to reduce long-term care insurance costs is to buy coverage for 50% to 75% of the projected costs, rather than for 100%, and plan to cover the rest from your savings. Around one-third of people don't need long-term care at all during their lifetimes, and some only need a short period of care in their homes.

"Most people I'm working with are looking to cover 50% to 75% of the cost of care," says Brian Gordon, president of MAGA Long-Term Care Planning in Bannockburn, Illinois. For example, they may decide to get $3,000 per month in coverage for three years, with benefits rising 3% per year compounded - that will start out as slightly more than $100,000 in benefits and rise with inflation. It may not cover the full cost of care, but it can help with the expenses. "They may decide that at least it gives their family some money to work with if something happens," says Gordon. "A big mistake is to try to buy more benefits and try to cover everything, but my goal is to give the family some good monthly income to work with if something happens to them."

To figure out how much coverage to get, find out how much long-term care costs in your area. You can look up median costs by city and state in the Genworth Cost of Care survey. Then calculate how much you could afford to pay from your savings and income, and you buy just enough long-term care insurance to fill in the gap.

Buy coverage with a spouse or partner

Buying a policy with your spouse can reduce your premiums by as much as 30% with a couples' discount when both partners apply. Even just being married could earn you a discount of up to 15%.

"When you have two people buying the policies, some insurers give substantial discounts for the couple," says Gordon. You may get a discount of up to 30% if both partners apply for long-term care insurance, or you may even get a discount of up to 15% just for being married or having a partner, even if only one applies for coverage, says Gordon.

A 55-year-old couple who buys a policy with a $4,500 monthly benefit for three years and 3% compound inflation would pay $3,050 on average, even though a single man would pay $1,700 and a single woman would pay $2,675, according to the American Association for Long-Term Care Insurance.

The average need for care is three years, but some people end up needing no care at all, while others need care for much longer if they have a long-lasting condition like Alzheimer's. With a shared-benefit policy, you get a pool of benefits that you can share between both spouses. For example, instead of each buying a four-year benefit period, you have eight years between the two of you. Adding the ability to share benefits can increase your premiums by 10-15%, but it may make you more comfortable buying a shorter benefit period - such as three years rather than four or five years - which could ultimately save you money and provide more coverage for the spouse who needs it.

Consider coverage when you're in your 50s or early 60s - or even younger

Buying a policy in your 50s or early 60s results in lower premiums, since you're less likely to have medical conditions that make it more difficult to qualify for coverage. For example, a single 55-year-old man who buys a policy with a $180,000 benefit pool that doesn't grow with inflation would pay about $875 per year for coverage, while a 65-year-old man who buys a $162,000 pool of benefits would pay $1,400 to $2,100 per year, depending on his health.

Buying coverage in your late 40s or 50s might be perfect timing if you are no longer supporting your kids and have more money to set aside for your own future. Keep in mind that the insurer could increase premiums for all policyholders before you need care, so you need to build that possibility into your budget, too.

Make smart inflation adjustment decisions

Choosing 3% compound inflation protection rather than 5% keeps long-term care insurance affordable, while allowing the benefits to grow substantially over time. At 3%, a benefit pool starting at $164,000 at age 55 will grow to $386,000 by age 85, according to the American Association for Long-Term Care Insurance. Choosing 5% leads to unaffordable premiums, and it's no longer the standard recommendation.

Find out what other inflation options the insurer offers. If 3% compound inflation protection costs too much, you may want to consider starting with a larger monthly benefit with a 3% simple inflation adjustment, which still increases the value of your coverage but costs less. Or you may have the option to have 3% compound inflation continue for just 20 years rather than for your lifetime.

Choose the waiting period carefully

A 60-day elimination period is generally the best balance of cost savings vs. potential out-of-pocket costs. Elimination periods (the waiting period before benefits kick in) range from 30 to 180 days. The longer the waiting period, the lower your premiums, but the more you'll pay out of pocket. For example, you have a $200 daily benefit and a 90-day elimination period, you could pay $18,000 before your policy pays anything.

Also, find out whether the waiting period for home care is the same. Some policies have a 0-day waiting period for home care but a longer waiting period for assisted living and nursing home care. If you think you'll start by receiving care in your home - which is how most claims begin - then the 0-day waiting period for home care can save you money in out-of-pocket costs.

Tax-efficient tips for paying long-term care insurance premiums

Three tax-efficient strategies can help pay for long-term car insurance premiums: withdrawing tax-free funds from a health savings account (HSA) up to age-based IRS limits, deducting premiums as a medical expense if you itemize and medical costs exceed 7.5% of your adjusted gross income and rolling over cash value from a permanent life insurance policy or annuity tax-free through a 1035 exchange.

Use tax-free money from a health savings account

HSA holders can withdraw money tax-free to pay long-term care insurance premiums, with maximum withdrawal amount based on their age. 2025 IRS limits allow you to withdraw up to $480 if you're 40 or younger, $900 for ages 41 to 50, up to $1,800 for ages 51 to 60, up to $4,810 for ages 61 to 70, and up to $6,020 if you're older than 70. Those limits are per person. Spouses who both pay long-term care premiums can each take tax-free withdrawals up to those limits based on their ages. The long-term care policy must be tax-qualified, which includes most standalone policies.

Deduct long-term care premiums as a medical expense

You can deduct long-term care premiums if you itemize your income-tax deductions, up to the same limits based on age as the HSA withdrawals, and only after they exceed 7.5% of your adjusted gross income. You can't take the tax deduction if you took tax-free HSA withdrawals for the premiums. For more information, see IRS Publication 502, Medical and Dental Expenses.

Make a tax-free rollover from life insurance or an annuity

A 1035 exchange allows you to roll over the cash value from a permanent life insurance policy or an annuity tax-free to pay long-term care insurance premiums. This can be helpful if your kids are grown and your house is paid off, and you need long-term care more than you need a life insurance policy. Or you can use the cash value to pay premiums for a hybrid policy that provides both long-term care coverage and life insurance -- if you don't need care (or only need some care), the policy provides a death benefit for your heirs. You can also roll over money from an annuity, even if you're in poor health, to pay long-term care insurance premiums without paying taxes on the withdrawal first. Contact your insurance company or agent about the procedure for making the tax-free rollover.

To make long-term care insurance more affordable, cover only 50% to 75% of projected care costs, buy with a spouse for discounts of up to 30%, purchase coverage in your 50s, choose 3% compound inflation protection and select a 60-day elimination period. To reduce tax liability while paying premiums, use tax-free HSA withdrawals up to the IRS age-based limits, deduct premiums as a medical expense if your expenses exceed 7.5% of your AGI or use a 1035 exchange to roll over funds from a life insurance policy or annuity.

Sources

Genworth. "Cost of Care Survey 2025." Accessed April 2026.

FAQ: Long term care insurance costs

Are long-term care insurance premiums tax-deductible?

Yes, you can deduct long-term care insurance premiums if you itemize your expenses and your medical expenses exceed 7.5% of your adjusted gross income for the tax year.

Long-term care insurance covers the cost of home care aides, nursing home care or assisted living, along with related expenses when you need medical care over a long period of time.