By Marc Gilman
(800) 927-9326 |
This is the second post in a three-part series on the greatest financial risks retirees face — and the insurance strategies built to address each one.
Key Takeaways
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Long-term care is one of the most expensive events in retirement, and most of it isn’t covered by Medicare or traditional health insurance.
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Unlike a market downturn or an unexpected expense, an extended care need can last for years, drawing down savings for as long as it continues.
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Many retirees avoid traditional standalone LTC insurance out of concern they’ll pay premiums for years and never use the benefit.
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Newer hybrid policies solve that concern directly: life insurance with a long-term care rider lets care costs be paid from the death benefit while you’re alive, with any unused amount passing to your family if care is never needed.
Why Is Long-Term Care the Greatest Risk in Retirement?
Long-term care is often called the greatest risk retirees face for a simple reason: it’s the risk most people leave out of the plan entirely. Most retirement plans are built around predictable expenses — housing, food, travel, healthcare premiums. Long-term care doesn’t fit that mold. It’s not a question of if your retirement budget can absorb a known cost — it’s a question of an open-ended, unpredictable need that can run for a few months or for several years, and the bill lands almost entirely on you and your family.
The likelihood of needing long-term care rises with age, which means the risk doesn’t announce itself early — it tends to surface later in retirement, often after other financial decisions have already been locked in. That’s part of why it gets overlooked: it’s easy to plan around costs you can see coming, and much harder to plan around one you can’t.
Medicare provides very limited coverage for long-term care. It generally covers short-term skilled nursing or rehabilitation following a hospital stay, not the extended custodial care — help with bathing, dressing, meals, mobility — that most long-term care actually involves. Without a dedicated funding source, those costs typically come straight out of savings, investment accounts, or home equity: the same assets you were counting on to fund the rest of retirement.
That’s what makes this risk different from market risk or inflation. A bad market year is temporary and can recover. A long-term care event can permanently and irreversibly reduce what’s left for the rest of your retirement — and, as we covered in the first post in this series, for a surviving spouse who’s counting on those same assets after you’re gone.
What Happens If You Delay Long-Term Care Planning?
Delaying this decision is common, and it’s understandable — long-term care can feel distant and hypothetical until it isn’t. But that delay carries a real cost. Waiting until a health event forces the issue removes options: underwriting becomes harder or impossible after a diagnosis, and a sudden care need can force a household to liquidate investments or draw down savings faster than planned, right when those assets are supposed to be generating retirement income. Planning ahead of time — while you still qualify for coverage and have time to compare options — keeps the decision in your hands instead of being made for you by circumstances.
Why Do So Many Retirees Skip Long-Term Care Insurance?
The most common objection to standalone long-term care insurance is straightforward: what if I pay premiums for 20 years and never need care? It’s a fair concern, and it’s kept a lot of people from getting coverage they otherwise could have used.
That concern has driven real change in the products available. Rather than a “use it or lose it” structure, many retirees are now looking at permanent life insurance policies built with a long-term care rider attached. If long-term care is needed, the policy’s death benefit can be accessed early to pay for that care. If it’s never needed, the full death benefit passes to your beneficiaries as originally intended. Either way, the money isn’t wasted — it’s simply directed to whichever need actually shows up.
Where Does Insurance Planning Fit In?
There are a few structures worth understanding as you weigh your options:
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Traditional standalone LTC insurance is built specifically to cover care costs, generally at a lower premium for the amount of care coverage than a hybrid policy, but with no return of premium or death benefit if care is never needed.
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Hybrid life insurance with an LTC rider combines permanent life insurance with the ability to accelerate the death benefit for qualifying long-term care expenses, addressing the “what if I never use it” concern head-on.
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Annuities with an LTC rider can offer an enhanced payout for qualifying care expenses, sometimes with easier underwriting for retirees who may not qualify for traditional LTC coverage due to health history.
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Health savings accounts (HSAs), for those who have them, can be used to pay qualified long-term care insurance premiums up to IRS age-based limits, and can supplement out-of-pocket care costs tax-free — making an HSA a useful piece of a broader LTC funding strategy even though it isn’t insurance on its own.
Which approach fits depends on your health, your existing coverage, your assets, and how this decision fits alongside the rest of your retirement income plan. For a fuller walk-through of how these options compare, see our complete guide to long-term care insurance — or bring the comparison to a licensed advisor rather than working through it alone.
What To Do Next
If you don’t currently have a plan in place for how a long-term care event would be funded, that’s a gap worth closing before it becomes urgent. Gilman Agency can walk you through standalone LTC, hybrid life insurance, and annuity-based LTC rider options side by side, so you can see what actually fits your situation.
Call us at (800) 927-9326 or email to schedule a review.
Next in this series: the third greatest retirement risk — not securing a lifetime cashflow.
Sources: Andrew Rosen, “Do You Still Need Life Insurance In Retirement? Here’s How To Know,” Forbes; Centers for Medicare & Medicaid Services guidance on Medicare coverage of long-term care.
