Should you save money with a three-year long-term care policy?

Long-term care insurance is expensive. One way that some people reduce the cost is to buy a policy that will cover care only for a limited period of time (such as three years), as opposed to a policy that covers care indefinitely.

Last year, almost a third of individual buyers purchased a three-year policy, according to the American Association for Long-Term Care Insurance.

But is that sufficient coverage? To answer that question, the Association recently published a report on the statistical likelihood that three years of coverage will be enough.

According to the report, the risk of running out of benefits with a three-year policy is fairly small. Overall, of those people who bought a policy with a benefit period longer than three years and made a claim for long-term care, only 13.1 percent needed that care for longer than three years. Only 7.6 percent of those with a policy longer than four years needed care for more than four years, and only 4.5 percent of those with a policy longer than five years needed care beyond five years.

The risk is lower for men than for women. For instance, among people who filed a claim at age 82, men had a 12.4 percent chance of exhausting their three-year benefits, while women had a 23.5 percent chance.

The savings from buying a three-year policy are significant. According to the report, most people save between 42 and 54 percent on their premiums compared to buying a policy with indefinite coverage. (People who buy a two-year policy save 51 to 64 percent, while people who buy a five-year policy save 30 to 39 percent.)

However, if your need exceeds the length of the policy, you’ll be on your own paying for care. A 55-year-old man who exhausts a three-year policy can expect to need long-term care for another 3.7 years, while a woman of the same age would need an average of 5.3 years of additional care. An 82-year-old man who exhausts a three-year policy will likely need another 1.9 years of care, while an 82-year-old woman will likely need 2.9 years.

Printed copies of the report are available only to Association members, but you can read it for free online at