Three Forms of Insurance to Pay for Assisted Living or Nursing Care


Paying for long-term care or assisted living is a concern for many seniors. In a recent post, I discussed three ways to pay for long-term care or a nursing home stay. There are several ways you can use insurance to pay for long term care. Let’s dive a little deeper into using an insurance policy, either long-term care or life insurance, to cover assisted living or nursing home costs.

The Benefits of Long-Term Care Insurance
Long-term care insurance is a policy, separate from whole or term life insurance, that can help cover the costs of assisted living or nursing home care when Medicare doesn’t cover these costs.

If you are not yet retired, long-term care insurance may be offered by your employer or you can purchase it privately. Like purchasing life insurance, it’s best to purchase long-term care insurance while you’re young and healthy because premiums will be lower. If you try to purchase a policy in your later years, you may be denied coverage because of your age or your health.

When you select a long-term care insurance policy, make sure it covers a variety of types of long-term care. Some long-term care insurance will only cover nursing home stays. You may want to look for a policy that will cover assisted living, adult day care, in-home care, and both skilled and unskilled care.

One of the benefits to a long-term care insurance policy is that it may reduce your tax liability today. If the policy is Tax-Qualified (TQ) you may be able to include some or all of the premiums as a medical deduction on your Federal income taxes.

Long-term care insurance has many variables. Choose carefully and make sure to buy long-term care insurance from a reputable company that will still be in business when you want to cash in your policy.

Also, keep in mind that if you don’t have a need for long-term care, you may lose the benefits and money you paid into it. The money may not be available to you or your heirs. Do your research amd look for a policy with a non-forfeiture benefit if this is a concern.

Using Accelerated Death Benefits to Pay for Senior Care
Accelerated Death Benefits (ADB) let you borrow against the death benefits of your life insurance policy to pay for senior care. Usually, the policy can only be used if you have a terminal illness or need nursing home or assisted living care permanently.

Even as you cash in an ADB policy, you must keep your life insurance policy current and continue to pay premiums. While an ADB benefit can be added to many life insurance policies for little or no cost, there are several drawbacks to using ADB over long-term care insurance. If you use ADB you may not be eligible for Medicare coverage. The amount of ADB coverage is typically lower than long-term care coverage, will not last as long, and it usually doesn’t offer inflation protection.

Nonetheless, adding ADB coverage to your life insurance policy, if you can do it at little to no cost, may be one option to pay for future nursing home or assisted living care.

Using a Life Settlement to Pay for Long-term Care
Some life insurance policies permit women over the age of 70 and men over the age of 74 to sell their current life insurance policy for its present value.

There are a few drawbacks to doing this:

  • There may be no money left for your heirs to cover funeral or burial costs.
  • The money from the sale of the policy is taxable.
  • Depending on the value of your policy, there may not be enough money left, after taxes, to cover the costs of your long-term care for as long as you need it.

If you can’t qualify for long-term care insurance or add an ADB to your life insurance policy, and your nursing home or assisted living stay is not covered by Medicare, this could be one option to pay for long-term care using insurance.

Planning ahead and consulting with a financial advisor to make the best decisions can reduce the risk of having to resort to “worst-case scenarios” to pay for long-term care.

SeniorLiving.Net is a free service for families to use that are looking for senior care or senior living for a loved one. Call (877) 345-1706 to speak to your local Care Advisor about senior care providers in your local area.