How Does One Pay for Assisted Living?

We understand that the cost of assisted living can be overwhelming at first. However, if you compare the average cost of an assisted living residence to the average cost of a nursing home or home care, assisted living is often one of the more affordable and convenient options.

This holds good especially if you do not need close medical supervision and the care services of a skilled nursing facility.

Ways to Pay for Assisted Living

What Are the Ways to Pay for Assisted Living Care?

If you are wondering how does one pay for assisted living, we invite you to go through the following options.

Life Insurance

You may have invested in a life insurance policy with a beneficiary in mind, but, hey, if you need to take care of yourself, there’s no need for second thoughts!

The amount from these policies can be applied toward living benefits if needed.

The insurance company may buy back the policy for 50-75% of its face value based on the policyholder’s monthly premiums, age, and health. However, some policies may not be flexible in their terms and will only offer ‘accelerated’ or ‘living‘ benefits if the policyholder is terminally ill.

You can still explore other options even if your insurance policy does not allow for living benefits.

A popular option is the “life assurance” benefit or “life insurance conversion program”. This program allows seniors to convert their policy benefits directly into long-term care payments.

Life Insurance

The life insurance conversion may only pay less than a life settlement. It is generally between 15 and 50 percent of the policy value–but is available for policies of lesser value that might not qualify for a life settlement.

You can sell your policy to a third-party company in return for a “life settlement” or “senior settlement,” which usually consists of 50-75% of the policy’s value.

After purchasing the policy, the monthly premiums become the responsibility of the third-party company, and that company receives the full value of the policy after the original policyholder dies.

A life settlement, or life insurance settlement, converts an existing life insurance policy into money that can be used to pay for long-term care services. A third party purchases the policy for a cash payment that is typically more than the surrender value of the policy but less than the death benefit amount.

This third party assumes the responsibility of paying the premiums and becomes the beneficiary of the policy. When the insured dies, the third party receives the death benefit.

Veteran’s Benefits

Veteran’s benefits will help you cover the costs of residential care in the following circumstances:

If you or your spouse has suffered a service-related injury or disability, the Veteran’s benefits can be applied toward the cost of your assisted living facility.

Also, you can make use of the Aid and Attendance benefits which are available to any disabled veteran (or spouse) whose income is less than a stipulated amount.

To receive the benefits you or your spouse is entitled to, you have to go through the Veteran’s Administration. We agree that it can be a complicated, time-consuming process and recommend that you consider working alongside a geriatric planner.

Veterans benefits

They are mostly up to date with the system requirements and process in place and will be able to help simplify the process of qualifying for benefits.

You can also check whether your senior living community offers any financial concierge services that will guide you through the process of applying for the benefits program.

Long Term Care Insurance

If you had purchased long term care insurance in the past, it can be put to good use if you need financial assistance with the costs of assisted living residence.

The policies apply to assisted living care. You just need to check how you can get the policy.

The policy amount can be used for a designated benefit for nursing home care. The evaluation will be based on a mental or physical diagnosis, which can be used to pay for assisted living.

The policy may also set a specific payment for home care needs. This amount can be paid directly to the assisted living facility.

The drawback is that if you have not already purchased long-term care insurance, it’s likely too late to do so now.

Use A Reverse Mortgage

If you are the owner of your home outright or are close to paying off the loan amount, a reverse mortgage might be the solution to your financial stress induced by the costs of needing an assisted living service.

A reverse mortgage allows you to cash out the value of your home equity.

Reverse Mortgage Form

The bank will decide what the value will be based on what the home is worth; they will calculate interest rates, the applicant’s age, and other factors, and the loan balance gradually increases over time.

Of course, you cannot have an existing mortgage on your house if you are looking to receive payments. The borrower can stay in the home until death even if the loan balance exceeds the home’s worth. Upon death, the loan balance must be repaid, which usually requires selling the home.

How to apply for a reverse mortgage:

The two conditions are that one homeowner must be over the age of 62 and that the other person must continue to live in the home.

We recommend that you spend time researching the pros and cons of reverse mortgages, as they aren’t for everyone.

Reverse mortgage research is quite a tough commitment to work out so you need to work with a reputable company. Spend time on research and understand the terms.

Read the fine print well as there are many rules about homeowners’ insurance and mortgage insurance you need to be aware of. There could be high fees involved or some terms and conditions that make it easy to lose your home.

Use Medicaid

Assess your finances to check whether you are qualified for Medicaid.

If you do not have much savings or financial assets and your income is low, you may qualify for Medicaid, which can help pay for assisted living. There are quick online tests available to see whether you qualify for Medicaid.

Also, the Medicaid eligibility rules vary from state to state, but typically, you need to have assets no greater than $2,000 beyond your home and car in order to qualify.

Only some assisted living communities will accept Medicaid, and Medicaid beds are usually limited. To find long-term residential care options near you, check with your local Area Agency on Aging. To help you navigate the complex signing up process for receiving public benefits, you can also call for a free consultation from a Government Health Insurance Counselor.

Private Pay with Personal Funds

The first thought you or your loved one may have is to pay for the assisted living facility costs with their own savings.  Perhaps you or your loved one has a pension or other retirement fund, additional income from stocks, or proceeds from selling a home.

Personal investment portfolios, like 401(k) plans or IRAs, can also be cashed in to help pay for care. However, paying out of pocket is often beyond what many people can afford over time. We are not saying that these options aren’t viable,  but the rising costs of care could eat through your savings in no time!

The solution here is to get your loved ones together to discuss the matter and find a means to fund the expenses by pooling resources and trading money for time.

For example, if one or two siblings or family members handle the majority of daily care, such as driving to medical appointments, others with less flexible work schedules might contribute money instead.

If there’s a family home that no one wants to sell yet, siblings with available funds might pay for assisted living with the promise of repayment when the house is sold.

Rent out your home

How about renting out the house so that you can use the rental income to pay for assisted living?

rent out your home

The idea might seem scary, but for a fee, you can hire a service to manage your property for you, while being able to generate enough income to help with the costs of skilled nursing care or getting into an assisted living facility.

Talk to your family members before you decide to rent your house out to strangers though. If any of your family members know someone who is looking forward to renting a place like yours, that would be ideal.

You can use more than one source of funds and financial assistance to cover assisted living costs, and as there are many options available,  seniors and their families should consider those that apply to their situation.

Before taking risks with investments and assets or making major financial decisions, be sure to speak with a reputable financial advisor and possibly an elder law attorney.

We hope that the information in this article has been helpful to you. Do let us know what points you found the most useful and feel free to add any suggestions as well!