Long-Term Care Annuity Products
Compare Benefits, Costs & Funding Options
For more than 30 years, ACACIA has helped clients plan for long-term care using annuity strategies with predictable costs and built-in benefits. As fully independent advisors, we compare long-term care annuity products from highly rated carriers to provide clear, unbiased recommendations.
Provide your state and age to receive pricing and guidance. We will help you compare options that fit your goals, timeline, and budget, including IRA or qualified dollars, nonqualified assets, and 1035 exchanges.
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Key Benefits of Long-Term Care Annuities
Leverage Retirement Savings – Use qualified dollars from an IRA, 401k, or other accounts to fund your LTC annuity and secure coverage without depleting your nest egg.
Valuable Tax Advantages – Benefit from tax-free 1035 exchanges for nonqualified annuities and tax-free withdrawals during claims to stretch your resources further.
Easier Health Qualification – Simplified health underwriting makes coverage more accessible, even if traditional long-term care insurance isn’t an option.
Peace of Mind – Guaranteed level premiums ensure predictable planning with no surprise increases.
How Long-Term Care Annuities Work
An annuity is a contract between you and an insurance company. A Long-Term Care Annuity is a deferred annuity with a long-term care rider.
This hybrid long term care insurance product, like a traditional deferred annuity, provides future payments based on an initial lump-sum investment. With a Long-Term Care Annuity, your long-term care benefits will typically be double or triple your investment.
For example, a $100,000 investment in an LTC annuity would provide $200,000 or $300,000 of long term care benefits. This can provide an annuitant with tremendous leverage of their premium dollars.
Long-term care annuity benefits are a pool of money with a monthly benefit cap. So an LTC Annuity with a $300,000 benefit could pay a monthly benefit for four to six years, depending on the monthly benefit selected. Some products can even pay benefits for an unlimited amount of time.
Access to benefits are triggered like long-term care insurance (when you have Cognitive Impairment or need help with Two out of the Six Activities of Daily Living).
Key Takeaway: A Long-Term Care Annuity combines a deferred annuity with long-term care coverage, offering significant leverage on your investment, typically doubling or tripling your premium into a pool of LTC benefits. Benefits are triggered by qualifying health conditions, and some plans provide care for unlimited durations.
Funding Long-Term Care Annuities
IRA & asset options: Qualified (IRA/401k) and nonqualified funds.
A popular way to fund a long-term care (LTC) annuity is to reposition an existing annuity or other asset. You can use either qualified (IRA, 401k, etc.) or nonqualified funds, depending on your financial situation.
Qualified Money – There may be benefits to using retirement accounts like an IRA or 401k to fund a long-term care annuity. Because distributions are often funded through an income rider, they may help satisfy annual Required Minimum Distribution (RMD) requirements. However, it’s important to consider how using these funds may affect your long-term retirement income.
Nonqualified Money – Assets such as bank CDs, savings, annuities, or life insurance can also be repositioned. In some cases, this approach may improve your current return while providing tax-advantaged long-term care benefits.
Note: Many people are able to perform a tax-free 1035 exchange from an existing annuity to an LTC Annuity. Still, it’s important to review the terms and any potential surrender charges.
Watch: How IRA Withdrawals Can Fund LTC (2:24)
Short explainer video on using IRA distributions and key considerations.
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See Which LTC Annuity Options Fit Your Goals.
Long-Term Care Annuity Pros and Cons
Here are the most common trade-offs to consider when comparing LTC annuity options.
LTC Annuity Pros
- Predictable costs: Often funded with a one-time premium, reducing the risk of future premium increases.
- 1035 exchange potential: Some existing annuities or life insurance may transfer into an LTC annuity via a 1035 exchange (rules vary).
- Tax advantages may apply: LTC benefits can be tax-favored depending on the product structure and your situation.
- Return-of-premium options: If care is never needed, some policies may return value to heirs (subject to contract terms).
- Simplified underwriting: Some hybrid LTC annuities can be easier to qualify for than traditional LTC insurance.
LTC Annuity Cons
- Up-front premium: Requires a significant initial deposit, which can reduce near-term flexibility.
- Limited liquidity: Surrender charges and restrictions may apply, especially in early years.
- Reduced death benefit if used: LTC benefits typically reduce account value and may leave little or no death benefit.
- Tax rules can be complex: Funding choices (qualified vs nonqualified) and benefit taxation vary by product and circumstance.
Bottom line: The best fit depends on how you want to fund coverage, your liquidity needs, and whether leaving a death benefit is a priority.
Long-Term Care Annuity Providers
We offer long-term care annuities from a range of highly rated insurance companies. The most suitable LTC Annuity insurance company for you will depend on several personal factors, including your age, health status and the amount you plan to invest. Our goal is to match you with a solution that fits your needs and financial goals.
Two popular options clients often compare include Nationwide CareMatters® and OneAmerica Annuity Care®.
Nationwide CareMatters Annuity
Nationwide CareMatters® is long-term care coverage linked to a deferred fixed annuity, designed to help fund future care needs, including care at home.
- Cash benefit: Typically pays a 100% monthly cash benefit once you qualify, for flexible use of funds.
- Informal caregiver option: May allow payments to an informal caregiver (such as a family member) depending on contract terms.
- Less paperwork: After qualification, monthly bills/receipts are typically not required.
- Legacy feature: Unused value may be paid to beneficiaries if care isn’t needed or benefits aren’t fully used.
OneAmerica Annuity Care
OneAmerica Annuity Care® is a fixed indexed annuity with long-term care benefits designed to help cover future care costs while offering index-linked growth potential.
- Flexible funding: Single premium; rider may be payable over time (where available).
- Underwriting: Often less medical review than traditional LTC (varies).
- Index-linked growth: Multiple crediting strategies can increase values and the LTC pool.
- Tax treatment: May support tax-free LTC withdrawals and 1035 exchanges (when structured appropriately).
- Continuation options: Optional riders may extend benefit duration, including longer periods or lifetime (plan-dependent).
Want a quick refresher on how annuities work? Here’s a simple comparison of immediate vs. deferred annuities.
What is an Annuity? (Immediate vs. Deferred)
An annuity is a contract with an insurance company that can turn a lump sum (or a series of contributions) into income. With an immediate annuity, income typically begins soon after purchase. With a deferred annuity, income begins later, often after an accumulation period.
Annuities can support retirement income planning and may also be used in long-term care strategies. Terms vary by liquidity, fees, and guarantees, so it’s important to compare contracts before choosing one.
Immediate vs. Deferred Annuities: Quick Comparison
Immediate and deferred annuities are two common annuity structures. The main difference is timing: immediate annuities start income sooner, while deferred annuities start income later at a date you choose.
With an immediate annuity, you typically pay a single lump-sum premium to an insurer in exchange for regular income that may begin within 30 days to 12 months, depending on the contract. Payments can be set for a specific term or for life.
Immediate annuities are often used to create predictable retirement income. Common trade-offs include limited access to the premium after purchase and inflation risk unless an inflation-adjusted option is selected.
A deferred annuity is designed for long-term planning, with income starting at a future date you choose. During the accumulation phase, value may grow tax-deferred before you begin taking income in the payout phase.
Deferred annuities may be fixed, indexed, or variable, with different levels of guarantees, market exposure, and fees. Withdrawals can trigger surrender charges and possible tax penalties. Taxes are generally due when money is withdrawn, especially when funded with pre-tax dollars.
Review Pricing and Options With a Specialist
Our specialists provide independent guidance on long-term care annuity products across 48 states. We help you compare carriers, understand underwriting requirements, and narrow options based on your goals. Personalized support includes:
✔ Selecting the right long-term care annuity
✔ Identifying the carrier that best fits your goals
✔ Navigating underwriting and next steps
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Long-Term Care Annuity FAQs
A long-term care annuity is a deferred annuity that combines a fixed interest rate, possible indexing strategies, and built-in long-term care benefits.
Long-term care annuity benefits will typically be double or triple your investment. For example, a $100,000 investment in an LTC annuity would provide $200,000 or $300,000 of long term care benefits. This can provide an annuitant with tremendous leverage of their premium dollars.
Section 1035 of the IRS tax code allows for the tax-free transfer of one type of insurance policy to another of “like kind.” This means that you may be allowed to convert an existing annuity into a long-term care annuity.
This can defer the gains associated with your existing annuity. And because of the non-taxable nature of long-term care insurance, a 1035 exchange ensures the taxable gain disappears if it’s used to pay for long-term care expenses. Tax-free exchages for LTC insurance >
Under Section 1035 of the IRS tax code, you may be able to make a tax-free exchange of an existing life insurance policy to a long-term care policy. This may be a prudent decision if your life insurance needs have changed and protecting yourself against potential long-term care needs is now a higher priority. 1035 exchanged for LTC insurance >
Premiums invested in a long-term care annuity are not lost when you die. One of the following will typically happen when you pass away:
If you pass before using the long-term care benefits: In most cases, an LTC annuity will pay a death benefit to your beneficiaries. This could be the accumulated value of the annuity or a guaranteed minimum amount, depending on the specific policy.
If you die while receiving payouts: The outcome varies based on your annuity’s terms. Generally, if you have not exhausted the annuity by using long-term care benefits, the unused portion is paid to your beneficiaries.
To know exactly what will happen in your case, it’s essential to review your annuity contract for clarification.
An indexed long-term care annuity allows you to link your contract’s growth to a crediting strategy.
For example, Indexed Annuity Care from OneAmerica® ties your contract’s growth to several crediting strategies tied to the S&P 500. As the account value grows, so does the amount available for long-term care expenses. Preferred LTC annuity >
Last updated: January 5, 2026
Written by: Craig Matesky, President, ACACIA Insurance
Reviewed by: Mike Berger, National Sales Manager