Long-Term Care Planning: Self-Funding vs. Insurance

9 October 2026

Self-Funding Long-Term Care vs. Long-Term Care Insurance: Which Approach Fits Your Financial Plan?

Key Points:

· Long-term care planning often comes down to whether you want to self-fund future care, purchase insurance, or combine the two based on your finances and risk tolerance.

· Self-funding offers more flexibility and control over your assets, while long-term care insurance can help protect your portfolio from a prolonged or expensive care need.

· Your assets, health, family history, relationship status, legacy goals, and comfort with uncertainty can all influence which approach fits best.

· A blended strategy, such as partial coverage or a dedicated care reserve, can help balance premium costs with protection against larger long-term care expenses.

Long-term care is one of those retirement expenses that can be easy to put off thinking about until it starts to feel more immediate. But the potential cost is significant. According to the most recent CareScout Cost of Care Survey, the national median for non-medical caregiver services is now over $80,000 a year, while the median cost of a private nursing home room reached $129,575 a year in 2025.

The need for care is also more common than many people realize. Research from the U.S. Department of Health and Human Services estimates that about 70% of adults who reach age 65 will develop a significant long-term care need during their lifetime.

If you earn a good income and have built meaningful savings, you may have more than one way to prepare. You can plan to cover care from your own assets, purchase long-term care insurance, or use a combination of the two.

Here’s how to think through the tradeoffs and decide which long-term care planning approach makes the most sense for your financial plan.

What Does Each Long-Term Care Planning Approach Involve?

Long-term care generally means help with everyday activities such as bathing, dressing, eating, and moving around safely. It can also include supervision for someone with memory loss or cognitive decline.

Care may be provided at home, in an assisted living community, or in a nursing home. Medicare typically covers only limited skilled care under specific circumstances, so many long-term care expenses are paid privately.

If you choose to self-fund long-term care, you set aside part of your savings and investments to cover future care. You keep control of those assets and can use them for other goals if you never need care. The downside is that you also take on the full financial risk if your care needs last for several years or become especially expensive.

Long-term care insurance works differently. You pay premiums in exchange for a pool of benefits that can help cover qualifying care expenses.

Most policies begin paying when you can no longer perform at least two of six activities of daily living on your own or develop a severe cognitive impairment. Insurance can help limit how much of your own assets you may need to spend, but premiums can be substantial and you may ultimately pay for coverage you never use.

How to Decide Between Self-Funding and Long-Term Care Insurance

For many people, the decision comes down to how much risk they’re comfortable taking, how much they can afford to set aside or spend on premiums, and how they want long-term care to fit into the rest of their financial plan. Here are six considerations that can help you determine the right approach for you and your family.

#1: How Large Are Your Assets Relative to a Potential Care Bill?

Self-funding tends to work best when you could cover several years of care without putting the rest of your financial plan under too much pressure. That means considering more than the care bill itself. You also need to account for your spouse's income needs, your retirement lifestyle, and any assets you hope to leave to family or charity.

If several years of care could significantly reduce your portfolio, insurance may help protect the money earmarked for other goals. On the other hand, if your assets are large enough to absorb those costs comfortably, self-funding may be the simpler option. For people somewhere in the middle, a smaller policy combined with personal savings can offer a useful balance.

#2: How Is Your Health Today?

Your health can play a major role in whether long-term care insurance is available and what it costs. Insurers typically review your medical history, and certain conditions, including recent cancer diagnoses, heart disease, or early signs of memory loss, may lead to higher premiums or make it harder to qualify.

This makes timing important. Your 50s can be a practical time to explore coverage, when premiums are generally lower and health issues may be less likely to limit your options.

According to the 2025 American Association for Long-Term Care Insurance (AALTCI) Price Index, average annual premiums for a $165,000-benefit policy with no inflation protection are $950 for a 55-year-old man, $1,500 for a 55-year-old woman, and $2,080 for a 55-year-old couple. At age 60, those averages rise to $1,200 for men, $1,900 for women, and $2,600 for couples.

Waiting too long can narrow your choices, especially if your health changes along the way.

#3: What Does Your Family History Suggest?

Your family's experience with aging can offer some clues about the kind of care you may eventually need. A history of dementia, Parkinson's disease, or simply living well into your 90s may increase the possibility of needing care for an extended period.

Cognitive conditions are especially important to consider because they can require supervision and support for many years. If longevity or memory loss runs in your family, it may make sense to plan for a longer-than-average care need and consider whether insurance could help cover some of that risk.

#4: Are You Planning as a Single Person or as a Couple?

For couples, a long-term care need affects both people financially. If one spouse needs several years of care, paying those costs entirely from shared savings can leave fewer assets available to support the other spouse throughout retirement.

Insurance can help reduce that strain. Some couples also consider policies with shared benefits, which may allow one spouse to use benefits that would otherwise be available to the other.

If you're single, the planning considerations are different. You may have fewer family members available to provide unpaid care, which could mean relying more heavily on professional care at home or in a facility.

#5: How Comfortable Are You with Uncertainty?

One of the hardest parts of long-term care planning is that you don't know whether you'll need care, how long it might last, or how much it could ultimately cost. According to ASPE research, about 24% of older adults receive more than two years of paid long-term care. While most people fall below that mark, a meaningful percentage face a much longer and more expensive need.

Self-funding means accepting that uncertainty and being prepared to cover whatever costs arise. Insurance, on the other hand, lets you exchange some of that uncertainty for a more predictable premium and a defined pool of benefits.

When deciding between self-funding and long-term care insurance, your comfort level with risk can be just as important as the numbers themselves.

#6: What Do You Want Your Money to Do if You Never Need Long-Term Care?

One advantage of self-funding is flexibility. If you set aside money for long-term care and never need it, those assets remain yours. You can use them for other goals, leave them to your heirs, or direct them to causes you care about.

Traditional long-term care insurance works differently. In many cases, the premiums you've paid don't come back to you if you never need care. If preserving assets for family or charitable goals is important to you, it's worth considering how each approach fits with those priorities.

Is There a Middle Ground Between Self-Funding and Insurance?

You don’t necessarily have to choose between fully self-funding your care and relying entirely on insurance. Many people use a combination of the two, covering some potential costs with their own assets while using insurance to help protect against a longer or more expensive long-term care need.

Here are a few ways to combine the two:

Partial coverage. Purchase a smaller policy to cover part of your potential care costs, with savings available to make up the difference.
A longer waiting period. Choose a longer elimination period, meaning you pay for care yourself for a set amount of time before insurance benefits begin. This can help reduce premiums.
Hybrid life and long-term care policies. Combine life insurance with long-term care benefits, allowing the policy to provide value whether you need care or leave a death benefit to your beneficiaries.
A dedicated care reserve. Set aside a specific portion of your savings or investments for future care rather than relying on your broader portfolio to absorb the cost.

The right mix depends on what you can comfortably spend on premiums, how much care you could afford to pay for yourself, and how much financial risk you want to take on.

Building a Long-Term Care Plan That Fits Your Life

Planning for long-term care is ultimately about making sure you have options if your needs change later in life. The right approach can help you pay for the care you want, protect the people who rely on you, and preserve more flexibility for your other financial goals.

An experienced financial advisor can help you estimate what care may cost based on where and how you'd prefer to receive it, determine how much your portfolio could reasonably absorb, and compare insurance with a self-funding or blended approach. Together, we can build a plan that reflects your finances, family situation, health, and comfort with risk.

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