Paying for assisted living communities and other senior care services is a major concern for many Americans. While financial planning might seem overwhelming, it’s important to remember that there are financial resources helping families discover creative ways to pay for assisted living, giving them peace of mind that their loved ones can access the care they need.
How to Pay for Assisted Living Services: 10 Unique Payment Options
1. Long-term Care Insurance
Long-term care insurance, also known as LTC insurance and LTCI, is a type of private insurance that helps older adults pay for personal care services, such as assistance with activities of daily living (ADLs) like getting dressed and bathing. Insurance companies like Mutual of Omaha, Northwestern Mutual, New York Life, and Nationwide all offer long-term care insurance policies. Policies can either be a traditional standalone policy; a combined policy containing coverage for long-term care, life insurance, and annuities; or a specialty life insurance policy that contains a long-term care insurance rider.
The best time to invest in these policies is well before they’re needed, typically when someone is in their 50s or early 60s.
2. Reverse Mortgage
A reverse mortgage lets homeowners (usually at least 62 years of age) utilize their home’s equity, transforming some of that equity into a cash payment that they can use to pay for senior care services. The primary benefit of using a reverse mortgage is the ability to access cash quickly, without the need for a monthly payment. The largest drawbacks of using a reverse mortgage are that it can increase loan balances with interest and fees that accrue over time and inability to pay back the loan when it’s due can lead to losing the house itself.
This option is only available for older homeowners who outright own their home (or who have their mortgage mostly paid off) with the resources necessary to pay for ongoing expenses like property taxes.
3. Veterans Benefits
Veterans Benefits, also known as VA Benefits, are benefits for eligible veterans, their spouses (including surviving spouses), and dependents, available through the U.S. Department of Veteran Affairs.
Some VA Benefits, like the VA Aid and Attendance Benefits or Housebound Allowance, may help eligible veterans and family members access long-term care services received in their own homes, a skilled nursing care community, an assisted living community, a private care home, or an adult day health center. Services that may be covered include medical care, personal care services, and physical therapy.
4. Home Equity Line of Credit (HELOC)
A Home Equity Line of Credit, or HELOC, is a type of loan for homeowners, allowing them to use their home as collateral for the loan. The loan itself acts similarly to a credit card by allowing the homeowner to borrow as much money as they want (up to the available equity of their home). The loan has a borrowing period during which the homeowner can tap into that equity, followed by the repayment period where they must repay the loan balance plus interest.
These loans are popular options for homeowners with plenty of home equity and strong financial literacy to be able to pay back the loan, with payments that can fluctuate with interest rates.
5. Cancelling or Selling a Life Insurance Policy
A life insurance policy is typically bought with the intention to pay out a lump sum to designated beneficiaries once the insured passes away. It’s possible, however, to access funds from a life insurance policy while the policyholder is still alive.
The easiest way is through a cash surrender, where the policyholder cancels the policy through the insurance company, resulting in a payout to the insured of the accumulated cash value of the policy after any fees or loans are paid.
A more complex way to make use of a life insurance policy is through selling a policy via a life settlement. Unlike a cash surrender, a life settlement involves going through a third party rather than the original insurance company. The process can take weeks or months and involve complex underwriting. However, the payout through a life settlement typically is much greater than that of the cash surrender value.
This strategy may work for individuals who already have an established life insurance policy with a high enough policy face value.
6. Downsizing/Selling Assets
Selling major assets is a great strategy for older adults who want to simplify their daily life, get immediate funding for expenses, and reduce recurring expenses over the long term. For example, by selling a large family home that they can no longer properly maintain alone, an aging couple can quickly get access to funds through the sale of their home that they can then use to pay for a move to a senior living community and other necessary services. Besides the money gained from the sale, the couple will also reduce long-term expenses associated with maintaining a large property while also reducing the stress of regular home maintenance.
Older adults don’t need to own (and sell) a large house to downsize. Downsizing can simply mean making do with less and transforming any asset that no longer feels like an asset, but rather a burden, into liquid cash that can help cover necessary expenses.
7. Savings Accounts
Many older adults use a variety of funding sources to cover assisted living expenses; one of the most popular sources is a private savings account. Older people may benefit from accounts that offer few (or no) monthly or annual fees coupled with a high annual percentage yield (APY).
8. Retirement Accounts
There are plenty of retirement-related accounts seniors can tap into to help pay for necessary services, including:
- Health Savings Accounts (HSAs), which can help seniors access tax-free savings to pay for healthcare deductibles.
- Traditional, Employer-sponsored 401(k)s that seniors paid into during their working years.
- Traditional Individual Retirement Accounts (IRAs), which are non-employer sponsored and can supplement a 401(k).
- Roth IRAs, which are IRAs that offer tax-free withdrawals.
9. Bridge Loans
Bridge loans are short-term loans that, as the name implies, “bridges” any funding gaps between when a senior needs money now and securing longer-term financing solutions. For example, say a couple is selling their home to move into an assisted living community but has not yet received the money from the sale. The couple needs money right away to pay for the community’s move-in fees; a bridge loan will cover these costs while the couple waits for the home sale to finalize and the funds to transfer to their accounts.
Bridge loans are a great option for older adults with high-value assets and can secure more permanent funding, such as through Veteran’s Benefits, after a brief period of time.
FAQs
How do most people pay for assisted living?
Most people pay for assisted living using a combination of funding sources, including private savings accounts, retirement accounts, and insurance policies.
What happens to older adults who can’t afford care?
Older adults with limited funds may qualify for government assistance programs like Supplemental Security Income (SSI), which may help them afford the senior care services they need.
What are two ways to privately pay for long-term care?
Two ways to privately pay for long-term care are to sell assets like a home or to use a reverse mortgage to transform home equity into liquid cash.
Should I use life insurance to pay for assisted living?
Life insurance policyholders may be able to sell their policy to help cover services they need, including assisted living services.
What does senior care cost?
What senior care costs varies based on an individual’s needs. After all, no two people are the same, so their senior care plans will be as unique as they are.
For older adults who need some assistance in their daily lives, homemaker services or hiring a home health aide may be the right choice. According to CareScout’s Cost of Care survey, the 2024 national median monthly cost for homemaker services was $6,292 and $6,483 for home health aides. These in-home care costs are typically greater than the cost of assisted living. According to that same survey, the 2024 national median monthly cost for assisted living communities was $5,900.
With assisted living, residents get not just a better price for services (in many locations) compared to in-home services, but they also reap the benefits of community living. At Belmont Village Senior Living, each of our communities is truly a place to call home. Residents enjoy chef-prepared meals, extensive health and wellness programs, our award-winning Whole Brain Fitness programming, and much, much more.
Can I buy long-term care insurance for my parents?
Long-term care insurance helps many older people afford the level of care they need, where they need it. It may be the right choice for your family as well. Speaking to a registered financial advisor is a great way to explore your senior care payment options, including deciding if long-term care insurance is a viable solution for your family.
Final Thoughts
At Belmont Village, we work with families and their long-term insurance companies to help them secure the funding they need for compassionate care at our assisted living communities. If your loved one is looking to make the move to senior living, contact the team at the Belmont Village location closest to you to discuss your senior living options. We have something for most seniors, from vibrant independent living to compassionate assisted living to dignified memory care, and we’re eager to help your family find the right fit.
Disclaimer: This article is for informational purposes only. Belmont Village does not accept Medicaid, Medicare, or Social Security as payment options.