Senior Living News

Insurance Options for Paying for Senior Living

Using insurance for senior living expenses can be a smart option. Learn more about long-term care insurance and life insurance conversion.
insurance options for paying for senior living

Insurance Options for Paying for Senior Living

When you think of insurance, you might think it only applies to your house, car, and health. But in reality, using insurance for senior living expenses can be a smart option for some seniors. The key is reviewing your needs, as well as the details of the policy or policies you have.

Here is a look at two such options of using insurance for senior living: life insurance conversion, and long-term care insurance.

Life insurance conversion

Many people don’t realize that converting a life insurance policy into a Long-Term Care Benefit Plan is an option. Yet anyone with an in-force life insurance policy can transform it into a pre-funded financial account that disburses a monthly benefit to help pay for long-term care needs such as home care, assisted living, skilled nursing and hospice. Unlike life insurance, this account is a Medicaid-qualified asset.

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.

The pros of converting life insurance for senior living:

  • You can convert any type of life insurance plan: whole, term or universal.
  • There are no monthly premium payments; monthly payout amounts are adjustable based on how many months you want to receive payments.
  • Monthly payouts don’t count against qualifying for Medicaid coverage; a long-term care benefit plan is recognized by Medicaid as an acceptable spend-down during the five year look-back period.
  • A long-term care benefit plan is comprised of “private pay” dollars, which means that it can be used to pay for any kind of care—home care, assisted living, skilled nursing and hospice.
  • A special fund is set aside for future funeral expenses.

The cons:

  • You must have an immediate need for some form of acceptable long-term care, because monthly payments are made directly to a long-term care provider, not the previous holder of the life insurance policy.
  • Individuals with smaller policies ($10,000 or less) may be better off holding on to their plan or giving it up it in exchange for the cash surrender value. Or, those who have a life insurance policy with a large cash value built in (e.g. a $100,000 policy with a $90,000 cash value) may better off taking that cash value.

Long-term care insurance

Long-term care (LTC) insurance helps to pay for the cost of home care, adult day care, assisted living, memory care, skilled nursing, respite care and hospice by covering services typically not covered by health insurance, Medicare or Medicaid. Policies often even cover some homemaker services, such as meal preparation or housekeeping as long as it is in conjunction with the personal care services you receive.

How it works:

Many LTC policies begin to pay benefits once an assessment has determined you need help with two or more Activities of Daily Living or cognitive impairments; otherwise known as a benefit trigger. The insurance company will approve a Plan of Care. Then you will have an elimination period, typically 30, 60 or 90 days after the benefit trigger occurs before you start receiving payment for service. During this time, you must cover the cost of services you receive.

What to expect:

Once the benefits begin many policies pay your costs up to a pre-set daily limit until your lifetime

maximum is reached.

The pros of using long-term care insurance for senior living:

  • Offers you peace of mind.
  • Protects you from having to use your savings if you require long-term care.
  • Gives you flexibility. There are many ways to structure a long-term care policy. For example, you might be able to purchase joint coverage for you and your spouse, or opt for inflation protection.
  • You can lower your premiums by selecting a longer waiting period before benefits begin.
  • It is possible to deduct your premiums from your federal income taxes if you meet specific requirements.

The cons:

  • The older you are when you purchase long-term care insurance, the higher your premiums will be.
  • Your premium can increase after you have bought the policy. In some cases, significantly.
  • It’s hard to predict how much coverage you will need in 20 or 30 years.
  • You may never need it. While it’s estimated that approximately 70% of people over the age of 65 will require some form of long-term care during their lives, you might never lose the ability to perform the daily functions that trigger long-term benefits.

Using insurance for senior living is just one option

At Avalon Park in Cottleville, we understand that making decisions about senior living is a complex process, and we want to help. Our senior living professionals are ready to assist you with the information you need to make a choice that works for you.

We also invite you to learn more about our independent living neighborhood designed by neighbors, for neighbors. Our rates are all-inclusive and very affordable. We look forward to meeting you.

As friendly as it is thriving: Avalon Park.

Contact us today to set up your personalized tour. Learn how a move to senior living can give you the lifestyle you deserve – download our guide, Choosing the Right Community.

Lisa Smith
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