For many families considering assisted living, one of the biggest concerns is how they will pay for it. While the benefits certainly outweigh the costs, we understand that assisted living is not inexpensive. We also understand that budgets aren’t unlimited for most families. Which is why it’s important for families to know that there are a range of options to help pay for assisted living. Here are some of the most common.
Veterans Aid & Attendance Benefit
While the Veterans Aid & Attendance Benefit is all too often overlooked, it can be extremely helpful for eligible wartime veterans or their surviving spouse to receive this non-service-connected benefit to help pay for assisted living. The benefit starts with the basic pension and, depending on medical need, gives you or your loved one a rating that could add more money to your monthly pension. However, the military service criteria as well as the medical requirement AND the financial requirement must all be met to qualify.
Long-Term Care (LTC) Insurance
LTC insurance can help you or your loved one pay for assisted living by covering care services typically not covered by health insurance, Medicare or Medicaid. LTC policies typically begin to pay benefits after an assessment has determined that you or your loved one need help with two or more Activities of Daily Living or has cognitive impairments (known as a benefit trigger). Keep in mind that it is typically necessary to be in good health to qualify for LTC so if you’re considering assisted living because of these reasons, you or your loved one may no longer be eligible. What’s more, the older you are when you purchase the policy, the more expensive the premium might be.
Life Insurance Conversion
You may not realize that anyone with an in-force life insurance policy can typically transform it into a pre-funded financial account that disburses a monthly benefit to help pay for assisted living. Unlike life insurance, this account is a Medicaid qualified asset. The conversion process simply transfers ownership of the 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 you or your loved one in the Medicaid spend-down process.
Once transferred, the benefits administrator assumes all responsibility for paying the monthly premiums on the policy to the insurance company, and agrees to pay the previous policyholder (you or your loved one) a series of monthly payments based on the value of their policy. There are no application fees to apply for a life insurance conversion and the typical enrollment time is 30-45 days. Once converted, the benefits payments should start immediately.
A reverse mortgage is a type of home equity loan that is specifically for homeowners aged 62 or older. While the option is not for everyone, it may make sense if you or your loved one would like to access the equity in the home to supplement income to help pay for assisted living. You may be eligible if, in addition to age, the home is a primary residence and equity, as well as financial requirements, are met.
How does it work? The lender makes payments to the borrower based on a percentage of the accumulated home equity. That money can then be used to pay for assisted living. Keep in mind, however, the loan will need to be repaid when the borrower dies, sells the home, or permanently moves out.
Bonus Tip to Help Pay for Assisted Living
It’s also important to take a step back and consider your current assets more closely as you may have more ways to help you pay for assisted living than you initially think. Of course, selling or renting your home are common options to consider. But don’t forget about any savings, stocks, bonds, or annuities you or your loved one may have in addition to potential income from Social Security or a pension. Any or all of these things can help toward assisted living costs.