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LTC Insurance vs Self-Fund

The bet is precise: insurance wins if your care event outlasts the breakeven months.

Long-term care insurance is a bet with knowable odds, and this calculator prices both sides. A 55-year-old man pays about $2,200 a year for a $165,000 benefit pool with 3% compound growth (AALTCI 2025–26 Price Index) — $66,000 of premiums over 30 years that would grow to about $173,928 if invested at 6% instead. That self-fund pile covers roughly 14 months of $150,000-a-year care. The policy pool, meanwhile, compounds to about $400,500. So insurance wins if your care event runs longer than ~14 months; self-funding wins below that, and keeps everything if you never claim. Enter your own quote and care costs to find YOUR breakeven.

Why people use this

Pre-retirees holding an LTC quote use it to turn the agent's pitch into a bet with a number: invested at 6%, the premiums cover about 14 months of care — so the policy only pays if the care event outlasts the breakeven, and the 5-year dementia tail is exactly what is being insured.

How it works

1. Enter your annual premium quote and initial benefit pool (AALTCI benchmarks pre-fill).
2. Set the benefit inflation rider, years until a typical claim, and care cost at claim.
3. Set the return you would earn investing the premiums instead.
4. Read total premiums, the invested-premium pile, the pool at claim age, and the breakeven care length.

Common questions

What are the odds I actually use the policy?

Per HHS modeling, about 56% of people turning 65 will need paid long-term care, but the average need is around 1.1 years — and only ~6.8% need five or more years (women 8.7%, men 4.9%). Insurance is priced for the tail: the 5-year, $500,000+ dementia or nursing-home event that would break a surviving spouse's plan. If your breakeven is 14 months and the average claim is 13, the decision hinges on how scared you are of the tail, not the average.

Can the insurer raise my premium after I buy?

Yes on traditional policies — insurers file with state regulators and approved in-force increases averaged about 28% in 2024 (down from the brutal legacy-era hikes). If that risk bothers you, hybrid life/LTC or single-premium policies have no ongoing premium to raise, at the cost of a much larger upfront commitment (~$50k+ lump sum or $3,000+/yr).

When is self-funding clearly the right answer?

Two cases. Above roughly $2M of investable assets single ($3M couple), a median care event is absorbable and you are insuring only the tail — many still buy for spousal protection. Below ~$200k, premiums strain the budget and Medicaid is the realistic backstop anyway. The middle zone — a few hundred thousand to $2M — is where the breakeven math in this calculator actually decides it. Also note: applying late is costly — 38% of applicants aged 65–69 are declined outright.

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