The words “long-term care” aren’t typically the topic of conversation until the time comes to make decisions for yourself or for a loved one—and then the question of how to pay for it often follows. Rather than wondering where you’ll have to go to find the funds you will need, consider the resources you might already have, such as how insurance can help pay for senior living.
Understanding the costs of long-term care
A recent Genworth Cost of Care Survey estimated the median cost of care in a semi-private nursing home (skilled nursing) room to be $93,072 a year. The average cost of assisted living in the U.S. is $3,628 per month. With numbers like these, it’s easy to see how quickly a nest egg that was intended to cover retirement costs could disappear quickly.
However, if you have a life insurance policy, or a long-term care insurance policy, you have in your hands a source of funding that should not be ignored. Knowing how insurance can help pay for senior living can, in turn, help you.
How Long-Term Care (LTC) insurance can help pay for senior living
People often look into purchasing long-term care insurance policies when they’re in their 50s or early 60s and still relatively healthy. Typically, younger purchasers are more likely to qualify and can score lower rates. Those who choose to buy a long-term care insurance plan are often hoping to avoid burdening a spouse or child with the work and expense of at-home or inpatient care.
You certainly can purchase a long-term care policy at an older age, just be aware the costs will be higher. Consulting with your financial advisor will help you decide if this is the right option for your situation.
LTC insurance helps to pay for the cost of home care, adult day care, assisted living, memory care, skilled nursing and hospice by covering services typically not covered by health insurance, Medicare or Medicaid. Under most long-term care policies, you’re eligible for benefits when you can’t do at least two out of six “activities of daily living,” called ADLs, on your own or you suffer from dementia or other cognitive impairment.
The activities of daily living are:
- Going to the bathroom
- Toileting (getting on or off the toilet)
- Transferring (getting in or out of a bed or a chair)
Usually with this type of insurance, you’ll have to pay for long-term care services out of pocket for a certain amount of time, such as 30, 60 or 90 days, before the insurer starts reimbursing you for any care. This is called the “elimination period.” The policy starts paying out after you’re eligible for benefits and usually after you receive paid care for that period. Most policies pay up to a daily limit for care until you reach the lifetime maximum.
How life insurance conversion can help pay for senior living
Anyone with an in-force life insurance policy—term, universal, whole life and group life—can transform it into a pre-funded financial account that disburses a monthly benefit to help pay for long-term care needs.
For example, you can use the funds to pay for independent living or assisted living, which is helpful if your loved one transitions from independent living to a higher level of care. Long-term care benefit accounts can also be used for home healthcare, private duty home care, memory care for people with Alzheimer’s disease or dementia, and certain related senior care services.
Unlike life insurance, this account is a Medicaid qualified asset. Any remaining balance in the account at the end of your life would be paid to your family or your designated beneficiary.
How it works:
- The conversion process transfers ownership of a life insurance policy from the original holder, to an entity that acts as the benefits administrator. Because the original owner no longer holds the policy, it won’t count against them in the Medicaid spend-down process.
- The benefits administrator assumes all responsibility for paying the monthly premiums on the policy to the insurance company, and agrees to pay the previous policy holder a series of monthly payments based on the value of their policy. These payments can then be used to pay for your long-term care.
- If the amount of your payment needs to change, it can be adjusted.
Knowing how insurance can help pay for senior living is just part of the process.
As you put together your plan for paying for senior living, consider all your options, talk with a professional, and take the time to decide what is right for you and your family. At St. Mark Village, we are here to help.
For four decades, we have provided exceptional living options for adults 62 and older, including seamless access to future care options through our Continuum of Care. Contact us or call 727-464-1750 today to connect with our friendly and knowledgeable counselors and learn why so many are proud to call St. Mark Village home.