Insurance Planning for Senior Living: What Families Need to Know

How can you use insurance for senior living costs? Here are two options you might not have known about that could help with funding long-term care.

Using insurance for senior living: why it’s worth considering

As the population of those over the age of 55 increases, there will be more and more demand upon the healthcare system to provide the care needed, which undoubtedly will result in ever increasing costs.

• Seven out of 10 people will need some form of long-term care in their lifetime.
• 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.

Being aware of all the possible sources of funding for supportive care can help you plan now for future needs. Using insurance for senior living costs might be a strategy that would work for you.

Long-Term Care Insurance for Senior Living

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 if it is in conjunction with the personal care services you receive.

Before purchasing long-term care insurance, it’s always a good idea to make sure the policy offers the right coverage for you and your family’s situation.

The process:

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

It is important to remember that Medicare does not 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.

Conversion of Life Insurance for Senior Living

Many people don’t realize that converting a life insurance policy into a Long-Term Care Benefit Plan is another 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.

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.

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.

Consider all your funding options. Then make the choice that is right for you and your family.

At Carriage Crossing we know that everyone’s life journey is different and that no two residents are alike. Because of these differences, we tailor the levels of care in our communities to accommodate the needs of each individual. Let us tell you more.

Download our free guide to learn funding options for senior living you may have not considered yet!