By Marc Gilman

(800) 927-9326 |

Most conversations about long-term care insurance focus on individuals planning for their own retirement. But there’s a second, less-discussed application: businesses using long-term care insurance as a selective benefit for executives and key employees. Done right, it’s a genuine retention tool with real tax advantages. Done without understanding the mechanics, it’s easy to overpromise what the benefit actually delivers.

Key Takeaways

• Executive long-term care insurance is a “carve-out” benefit — employers can select specific executives or key employees to cover without offering it company-wide, because LTC insurance is exempt from ERISA non-discrimination rules.

• Tax treatment depends heavily on entity type: C-Corporations can deduct 100% of premiums with no cap, while S-Corps, LLCs, and partnerships face an IRS age-based deduction limit for owners and 2%+ shareholders (up to $6,020 for 2025, depending on age).

• What’s actually sold today for carve-outs is typically “multi-life” coverage — individually underwritten policies with simplified, streamlined underwriting — not a true group insurance contract.

• Benefits received are generally tax-free to the executive, and employer-paid premiums usually aren’t counted as the executive’s taxable income.

• The daily benefit cap and elimination period matter as much as the headline coverage amount — a policy can leave a real gap between what it pays and what care actually costs if it isn’t sized correctly.

• Hybrid life insurance products with LTC riders are a fast-growing alternative, generating $4.2 billion in new premiums in 2024 alone, and they solve the “use it or lose it” objection that traditional LTC policies carry.

What Makes This an “Executive” Benefit Rather Than a Standard One?

The mechanism that makes executive LTC insurance possible is straightforward: long-term care insurance was excluded from ERISA’s non-discrimination testing requirements. That means an employer can legally offer LTC coverage to a hand-picked group — the C-suite, senior managers, or any other defined class — without extending it to the entire workforce, and without running afoul of the rules that apply to most other benefit types. This is generally described as a “carve-out.”

It’s worth being precise about the underlying insurance structure, though. What’s typically sold for this purpose today isn’t a true group LTC contract — those require large, non-employer-based groups (200+ members, existing for reasons other than buying insurance) and fewer than 15 carriers still write them following a market pullback after heavy losses in the 1990s and 2000s. What businesses actually use for executive carve-outs is multi-life coverage: individually underwritten policies for each covered person, sold together with simplified, streamlined underwriting and often preferred rates. It’s not guaranteed issue, but it’s meaningfully easier to qualify for than an individual policy purchased on the open market.

Who Is This Actually Right For?

This isn’t a benefit to offer broadly or without sizing it first. Industry guidance points to a fairly specific target: employees roughly 45 to 65 years old with household income of $100,000 or more. It’s explicitly not a fit for younger employees, and rolling it out without first understanding your workforce’s actual needs tends to under-deliver — one long-term care insurance specialist put it plainly: it’s not enough to just offer it, someone has to stay engaged to make sure people understand and use it, because it’s still a relatively unfamiliar benefit to most employees.

Some organizations start by offering LTC exclusively as an executive benefit before considering it more broadly, which is a reasonable way to test the benefit’s value before expanding it — but it does mean getting the sizing and target group right matters more than with a typical broad-based benefit.

What Are the Tax Advantages, Specifically?

This is where the benefit gets genuinely attractive, but the details depend heavily on how your business is structured.

C-Corporations get the cleanest treatment: the company can deduct 100% of premiums paid for any covered employee, with no age-based cap. Premiums aren’t included in the employee’s taxable income, and benefits are received tax-free when used for qualified long-term care.

Pass-through entities — S-Corps, LLCs, and partnerships — face a real limitation for owners and 2%+ shareholders: the deduction is capped at the IRS’s age-based eligible premium amount, which for 2025 ranges from $480 (age 40 or under) up to $6,020 (over age 70). Any premium above that cap isn’t deductible as a medical expense for that owner. Importantly, this cap applies only to owners and significant shareholders — non-owner employees at the same pass-through entity still get the full premium treated as deductible.

One underused point worth knowing: this deduction limit rises substantially with age, right around the time it matters most. Many younger buyers can’t itemize enough to benefit from the deduction at all, but the eligible amount jumps sharply after age 70 — which tends to be exactly when income drops and medical expenses climb enough to make itemizing worthwhile. Buying LTC coverage while you’re insurable sets up a real tax benefit for later, even if it doesn’t move the needle much in year one.

What Does a Typical Plan Design Look Like?

Executive LTC benefits are often structured in tiers rather than all-or-nothing. A common pattern:

• 100% of premium paid for the executive team

• A partial contribution for senior managers

• A smaller stipend or voluntary access for the rest of staff

Employers can also use an accelerated funding schedule — often 10 years — so the company’s cost is predictable and finite, and the executive ends up owning a fully paid-up policy by the time they retire. Some in the industry describe this as a “golden handcuffs” arrangement; others push back on that label specifically because LTC benefits are often vested or owned outright by the executive rather than forfeitable if they leave early, so the retention effect is more about signaling investment in the person than truly locking them in.

Some carve-out plans are built on a life insurance chassis rather than a standalone LTC policy — funded as company-owned life insurance with an LTC rider, so the business recoups its cost through a death benefit even if the executive never uses the LTC benefit. This is one way employers solve the “we paid for something that might never get used” concern at the corporate level.

What Should You Know Before Assuming a Policy “Covers” Long-Term Care?

This is the detail that’s easy to gloss over when a benefit is being sold on its retention value rather than its actual coverage mechanics. Traditional LTC policies typically cap the daily benefit — often cited around $160/day for nursing home care in industry data — with a common 90-day elimination period before benefits start and a maximum benefit period, frequently around three years. Against nursing home costs that can run considerably higher per day, that gap is real: the difference between the policy’s daily cap and actual costs is the executive’s (or the company’s) responsibility to cover.

None of this makes the benefit a bad idea — it just means “long-term care insurance” isn’t a single, standardized product, and the specific coverage amount, elimination period, and benefit duration matter as much as the fact that coverage exists at all. This is exactly the kind of thing worth reviewing carefully before implementation, not after a claim is filed.

Are Hybrid Products a Better Fit?

For a lot of employers, increasingly, yes. Hybrid life insurance policies with LTC riders combine a death benefit with long-term care coverage, and they’ve been gaining real market traction — industry data shows $4.2 billion in new hybrid premiums and 450,000 new policies in 2024 alone, with more carriers entering that market each year. The appeal is straightforward: if the LTC benefit is never used, the policy still pays a death benefit, which removes the “wasted premium” objection that traditional LTC insurance carries.

There’s a tax nuance worth knowing here too: only a portion of a hybrid policy’s premium may be deductible, and if the LTC benefit trigger requires a terminal condition (some life-insurance-based designs work this way), the payout doesn’t qualify for tax-free LTC treatment at all. The details of how a specific hybrid product is built matter for whether it delivers the tax advantages you’re expecting.

Where Does Insurance Planning Fit In?

Structuring an executive LTC benefit well means coordinating several things at once: the entity’s tax treatment, the specific policy’s benefit design, how it fits alongside other executive benefits like Section 162 bonus arrangements or hybrid life insurance you may already have in place, and making sure the target group and funding approach match what you’re actually trying to accomplish. Gilman Agency can help walk through those pieces together rather than in isolation.

What To Do Next

If you’re considering long-term care insurance as part of an executive benefits package, start by identifying your entity structure and target group, since both drive what’s actually achievable from a tax and design standpoint. From there, a specialist can help size the benefit correctly rather than defaulting to a generic policy that may not match what your executives actually need.

Call (800) 927-9326, or email to talk through your situation. TTY: 711.

By Marc Gilman, Gilman Agency

Sources: American Association for Long-Term Care Insurance (AALTCI), “Tax Deductible Long-Term Care Insurance Tax Limits” (IRS Revenue Procedure 2024-40); GreenProfit Solutions, “9 Top Questions About Executive Long Term Care Insurance”; TRC Financial, “Executive Benefit | Key Person Long-Term Care Plan”; LTCI Partners, “4 Reasons to Offer Executive Long-Term Care Insurance”; WorldatWork, “Might Long-Term Care Benefits Resonate With Your Workers?” (citing LIMRA and EBRI research); AARP.