5 Alternatives to Traditional Long-Term Care Insurance

Traditional long-term care insurance is a valuable tool, but it is not the right fit for everyone. Some people are concerned about paying premiums for a policy they may never use. Others may not qualify due to health conditions, or they may find the premiums too expensive later in life. The good news is that several alternatives exist to help you prepare for long-term care costs. Each option has its own strengths and tradeoffs, and the best choice depends on your financial situation, health, age, and goals.

According to the Administration for Community Living, about 56 percent of Americans turning 65 today will need some form of long-term care, and nursing home costs now average over $131,000 per year for a private room. Whether you use traditional insurance or one of these alternatives, having a plan in place is essential. For a foundation on how traditional policies work, see our complete guide to long-term care insurance.

1. Hybrid Life Insurance and Long-Term Care Policies

Hybrid policies, also called combination or linked-benefit policies, combine life insurance with long-term care coverage in a single product. They have become increasingly popular over the past decade and now account for the majority of new long-term care-related insurance sales.

How it works:

You pay a single lump-sum premium or a series of premiums over a set number of years, typically ranging from $50,000 to $200,000 for a single premium. In return, the policy provides both a death benefit and a pool of long-term care benefits, which is usually two to three times the death benefit amount. If you need long-term care, the policy pays for it by drawing from the LTC benefit pool. If you never need care, your beneficiaries receive the full death benefit when you pass away. Some policies also allow you to surrender the policy and get most or all of your premium back.

Pros:

• Guaranteed benefit: You or your heirs will receive something from the policy, whether you need care or not
• Premiums are typically fixed and cannot be increased by the insurer
• Can be funded through a tax-free 1035 exchange from an existing life insurance policy or annuity

Cons:

• Requires a large upfront payment, often $50,000 to $200,000 for a single-premium policy
• LTC benefits may be less comprehensive than a standalone traditional policy with the same total cost
• Using LTC benefits reduces the death benefit available to your heirs

Best for: People with liquid assets (such as savings, CDs, or an underperforming investment) who want guaranteed benefits whether or not they need care. Hybrid policies are also a good fit for people who are uncomfortable with the "use it or lose it" nature of traditional LTC insurance.

2. Short-Term Care Insurance

Short-term care insurance is a newer type of product that provides benefits for a limited period, typically six to twelve months, rather than the multi-year coverage offered by traditional long-term care insurance.

How it works:

Short-term care policies cover the same types of care as traditional LTC insurance, including nursing home care, assisted living, home care, and adult day care. The key difference is the duration. Benefits typically last 6 to 12 months with daily benefit amounts often ranging from $100 to $200 per day. Premiums are significantly lower than traditional LTC policies, and the underwriting process is often simplified, which means people with some health issues may still qualify.

Pros:

• Lower premiums than traditional long-term care insurance
• Simplified underwriting makes it easier to qualify, even with some health conditions
• Covers the same types of care settings as traditional LTC insurance

Cons:

• Limited benefit period of 6 to 12 months may not cover extended care needs
• Does not provide the same level of financial protection as a multi-year policy
• Not available in all states

Best for: People who cannot qualify for traditional LTC insurance due to health issues, those who want some protection at a lower cost, and older adults (ages 70 and above) who may find traditional policy premiums prohibitively expensive. It can also serve as a bridge or supplement alongside other strategies.

3. Annuity with a Long-Term Care Rider

Some annuity products allow you to add a long-term care rider, which provides access to your annuity funds for long-term care expenses, often with an enhanced benefit multiplier.

How it works:

You purchase a deferred annuity (fixed or indexed) and add an LTC rider at the time of purchase or during a qualifying period. If you need long-term care, the rider typically doubles or triples your annuity value for LTC expenses. For example, a $100,000 annuity with a 2x LTC rider would provide up to $200,000 for long-term care costs. If you never need care, the annuity continues to grow tax-deferred and can be used for retirement income or left to your beneficiaries. You can also fund an annuity-based LTC product using a 1035 exchange from an existing annuity or life insurance policy, which avoids triggering taxes on any gains.

Pros:

• Your money is never lost — it remains in the annuity if you do not need care
• Tax-deferred growth on your investment
• Can be funded through a tax-free 1035 exchange from an existing annuity or life insurance policy
• May have simplified underwriting compared to standalone LTC policies

Cons:

• Requires a significant lump-sum deposit to fund the annuity
• LTC benefits may be less comprehensive than a dedicated long-term care policy
• Annuities have surrender charges and potential tax implications on withdrawals

Best for: People who already own an annuity they want to reposition, those with a lump sum available to invest, and anyone who wants a dual-purpose product that provides both retirement income potential and long-term care protection. Consult a tax professional for advice specific to your situation regarding 1035 exchanges and annuity taxation.

4. Self-Insuring with Savings and Investments

Self-insuring means setting aside enough money in savings, investments, or other assets to pay for long-term care out of pocket if and when you need it. This is a viable strategy for some people, but it requires significant financial resources and careful planning.

How it works:

Rather than paying premiums to an insurance company, you dedicate a portion of your portfolio specifically to potential long-term care expenses. Financial planners generally recommend having at least $300,000 to $500,000 or more earmarked for care costs, depending on your state and your care preferences. This money should be invested conservatively and kept accessible, since you may need it at an unpredictable time. To understand how much you might need, see our guide on long-term care costs by state.

Pros:

• No premiums to pay and no risk of the insurance company raising your rates
• Complete flexibility in how you use the funds — no benefit triggers, elimination periods, or policy restrictions
• If you do not need long-term care, the money remains yours to use or leave to heirs

Cons:

• Requires $300,000 to $500,000 or more set aside, which is out of reach for most retirees
• Extended care lasting five or more years can deplete even large savings
• Investment returns are not guaranteed, and poor market timing could reduce your care fund
• Using savings for care may jeopardize your spouse's financial security or your retirement lifestyle

Best for: Wealthy individuals with substantial liquid assets who can absorb long-term care costs without impacting their overall financial plan or their spouse's security. Self-insuring also makes sense for people who have additional backup options, such as a spouse who can provide some care or adult children willing to help.

5. Home Equity: Reverse Mortgages and HELOCs

For many older Americans, their home is their largest asset. Home equity can be accessed through a reverse mortgage or a home equity line of credit (HELOC) to help pay for long-term care.

How it works:

A reverse mortgage (specifically a Home Equity Conversion Mortgage, or HECM) allows homeowners aged 62 and older to borrow against their home equity without making monthly payments. The loan is repaid when you sell the home, move out permanently, or pass away. The average reverse mortgage provides about $140,000 in proceeds. You can receive the funds as a lump sum, a line of credit, monthly payments, or a combination. A HELOC is another option that lets you borrow against your equity as needed, though it requires monthly payments and is typically harder to qualify for later in life.

Pros:

• Unlocks the value of an asset you already own without selling your home
• No health underwriting required for a reverse mortgage
• Funds can be used for home care, allowing you to age in place
• Reverse mortgage proceeds are generally not considered taxable income

Cons:

• Reduces the equity available to your heirs and can consume the entire home value over time
• If you move to a nursing home for more than 12 months, the reverse mortgage may become due
• Closing costs and fees on reverse mortgages can be significant
• Home equity alone may not be sufficient to cover years of full-time nursing home care

Best for: Homeowners with significant equity who want to age in place and need a supplemental source of funds for home care. A reverse mortgage works best as one piece of a broader care funding strategy rather than the sole plan for covering all long-term care costs.

Comparing the Alternatives at a Glance

Here is a summary of how these five alternatives compare across key factors:

• Hybrid life/LTC: Upfront cost of $50,000-$200,000. Guaranteed benefit whether or not you need care. Fixed premiums. Best for those with liquid assets who want certainty.
• Short-term care insurance: Lower premiums. Coverage for 6-12 months. Easier to qualify for. Best for older adults or those who cannot pass full underwriting.
• Annuity with LTC rider: Lump-sum deposit. Tax-deferred growth. Typically doubles or triples the annuity for care. Best for those repositioning existing assets.
• Self-insuring: No premiums. Requires $300,000-$500,000+ set aside. Full flexibility. Best for wealthy individuals with substantial reserves.
• Home equity (reverse mortgage/HELOC): Average proceeds around $140,000. No health underwriting. Reduces inheritance. Best as a supplement to other strategies for homeowners.

Building Your Long-Term Care Plan

The most effective approach to long-term care planning often involves combining multiple strategies. Many financial planners recommend a layered approach that uses different tools for different stages of potential care needs.

For example, you might use personal savings to cover the first few months of care, rely on a short-term care policy or annuity with an LTC rider to cover the next year or two, and keep home equity available as a final safety net. This combination approach reduces the cost of any single product while still providing meaningful protection.

No single approach is right for everyone. The best strategy depends on your age, health, assets, income, family situation, and personal preferences about risk. Consider speaking with a financial advisor who specializes in retirement and long-term care planning to evaluate which combination of strategies makes sense for you. For a detailed financial analysis, see our guide on whether long-term care insurance is worth it.

Whatever path you choose, the most important step is to start planning before you need care. Waiting until a health crisis occurs severely limits your options and can leave you and your family facing difficult decisions under pressure. By exploring these alternatives now, you give yourself the best chance of protecting both your health and your financial future.