Insurance Options for Paying for Senior Living

Family talking about finances

Value is important, especially when it comes to senior living—whether you are considering independent living for yourself, or you are helping a loved one find the right assisted living or memory care setting. You want to be sure you are making the right choice. And you want to explore every possible source of funding—including how you could use insurance for senior living costs should the need for long-term care arise. 

Who will need long-term care?

  • According to the U.S. Department of Health and Human Services, an estimated 70 percent of people over 65 will require some form of long-term care services during their lives.
  • The Alzheimer’s Association reports that almost 6 million Americans are living with Alzheimer’s disease. By 2060, the number is expected to reach 14 million.
  • The cost of long-term care has risen steadily over the past 15 years.

Using insurance for senior living costs: two options to consider

Long-term care insurance for senior living: 

According to the Association for Long-Term Care Planning, long-term care insurance is a policy that helps pay for long-term care services such as home care, nursing homes, assisted living communities, and more. 

Policyholders pay premiums that are based on whether they might have illnesses or health conditions that could require long-term care services but not shorten life spans Individuals who purchase long-term care insurance policies are those who wish to protect their assets, savings, resources, and family members from the potentially devastating costs.

The process:

  • Assessment: Individual must require help with two more Activities of Daily Living (ADLs) or have cognitive impairments (known as benefit triggers)
  • Approval: A plan of care is approved 
  • Elimination period: Following benefit trigger (usually 30, 60, 90 days)
  • Payments begin: Continue at pre-set daily limit until lifetime maximum is reached

It’s important to remember that Medicare doesn’t pay for personal care and custodial care. Medicaid does, but only for people with low income and assets. This is one reason for considering the comprehensive coverage of long-term care insurance.

Many people balk at the cost of long-term care insurance, thinking they either won’t need it, or that they will have enough financial resources to pay for whatever care they need. According to a 2016 Genworth Cost of Care Study, Americans between the ages of 55 and 64 have an estimated $104,000 in their savings accounts. This figure is much less than the average cost of long-term care, especially considering many people will need that care for several years. 

Converting life insurance for senior living:

This is an alternative option for a family that does not have long-term care insurance. With life insurance conversion, an in-force life insurance policy can be converted into a long term benefit plan at any time. The resulting pre-funded financial account disburses a monthly benefit to help pay for long-term care needs such as assisted living or hospice. After a senior’s private funds run out, they can apply for Medicaid long-term care.

Ownership of a life insurance policy is transferred from the original holder to an entity that makes regular payments on behalf of the individual receiving care based on the value of the policy. These payments are made directly to a long-term care provider, so there must be an immediate need for long-term care (including assisted living.)

With life insurance conversion, all health conditions are accepted. There are no wait periods. No care limitations. No costs to apply. No requirement to be terminally ill. No premium payments.  

Other benefits of conversion of life insurance for senior living:

  • Any type of life insurance plan can be converted:  whole, term or universal.
  • Monthly payout amounts can be adjusted based on how many months you wish to receive payments. 
  • Monthly payouts do not count against a person seeking to qualify for Medicaid coverage sometime in the near future, because payments are made directly to the care provider.
  • A special fund is set aside for future funeral expenses—usually five percent of the policy’s death benefit or $5,000, whichever is less.

Life insurance conversion may not be the best choice for everyone, depending upon the size of the life insurance policy and its cash value, as well as the life expectancy of the policy holder (it could be more prudent to pay for long-term care another way if that is economically feasible). The best advice is to check with a professional financial planner who can evaluate your individual situation.

Though sometimes overlooked, using insurance for senior living costs can be a smart choice, depending upon each family’s situation. At New Perspective Senior Living, we are here to help you. You may be surprised to learn just how affordable senior living can be. 

New Perspective is ready to welcome you.  Download our free Family Guide to Funding Senior Care & Housing. We invite you to learn more. Contact us today.