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How to Pay for Assisted Living Costs

assisted living costs

How much does assisted living cost, and what are your options for covering these expenses?

According to a government census, 10,000 baby boomers will turn 65 every day until 2030 and the U.S. Department of Health and Human Services notes 70% of these individuals will require some type of long-term care services. Pensions have become less common and many people don’t have adequate retirement savings to cover these costs out of pocket—so what options do you have? In this article, we’ll dive into how much assisted living facilities costs and provide you with several methods to pay for these expenses.

How much does assisted living cost?

Today, the national cost for a one-bedroom residence in an assisted living community is $48,612 a year or about $4,000 a month according to a Genworth Cost of Care Survey from 2019. What’s shocking, is that this number has skyrocketed by 68.79% since 2004 when the average cost for the same type of residence was only $28,800 as shown in the graph below from Genworth.

The cost of residence in an assisted living facility has risen significantly in this timeframe and is expected to continue doing so at an annual growth rate of about 2.97% over the next five years due to factors such as labor shortages, wage pressures, and regulatory changes. With this in mind, planning is essential to ensure you or loved ones will be able to cover these costs in the coming years.

Options to pay for the cost of an assisted living facility

Some people may think Medicare will cover these costs, but Medicare does not pay for the cost of non-medical long-term care or assisted living services. What about Medicaid? Medicaid eligibility is more complex than most may think, and many people may be surprised to find out they aren’t eligible. Even if you go through the Medicaid spend down process to become eligible, the amount you’ll receive likely won’t be enough to cover the full cost of assisted living.  Although Medicaid and Medicare won’t be enough for these expenses, here are some options that can help cover the cost of an assisted living facility:

Life settlement

One option many people are unaware of, is to sell their life insurance policy for a lump sum of cash through a life settlement. With a life settlement, you can sell your policy to a third-party buyer in exchange for a lump-cash sum that can be used to fund assisted living or retirement costs. Rather than waiting until your passing and awarding relatives with a death benefit, you can use the money you receive to pay for retirement and enjoy your remaining years with greater financial freedom.

The process is simple, you start by contacting a life settlement company such as Harbor Life, who will determine if you’re eligible for a life settlement and provide you with an estimate on the value of your policy. Next, they’ll use their connections with brokers and providers to find the right buyer for your case so you can maximize the value of your policy. Once the right buyer is found and you agree to sell, the life settlement company will facilitate the transfer process and handle all the complex legal paperwork.

You’ll receive a lump sum of cash and will no longer be required to pay your life insurance premiums. The third-party buyer who purchases the policy will continue paying these costs until your passing, at which point they will collect the death benefit amount.

Life settlements are ideal for funding assisted living costs because you can pay for these expenses without parting with assets that may be of use during your lifetime, such as a cherished family home that you may want to pass on to children or relatives. Additionally, the lump sum provides you with greater financial flexibility as opposed to other options that may provide you with a limited benefit amount each month.

How much is my policy worth?

Selling a home

If you or a loved one is moving to an assisted living facility, it makes sense to sell their house since it will no longer be needed. This can provide a large sum of cash that may go a long way in funding the cost of assisted living, but it also depends on if the senior owns the house and its actual value. According to Business Insider, the average listing price of a home in the U.S. is $226,000—however, 8-10% of that may go towards covering closing cost according to Zillow. Given the average cost of residence in an assisted living community is currently $48,612—you may find that selling your home only leaves you with enough money to cover about four years of expenses.

Reverse mortgage

As the name suggests, a reverse mortgage works the opposite way of a regular mortgage. Rather than paying money to own your home, you borrow money against its value—which is then paid back when you decide to sell the house. This option is most relevant for a couple who owns their home (the homeowner must be 62 or older), but requires one person to live in an assisted living facility while the other continues residing in the home. With this option, the person living in the home can use the money from the reverse mortgage to pay for the other’s care. The downside to reverse mortgage is that it essentially creates another loan on your home that comes with accumulating interest and fees, so when you do sell you’ll have to pay these in addition to the amount you borrowed.

Long-term care/assisted living insurance

Long-term care insurance, also known as assisted living insurance—refers to a type of insurance policy that can be used to cover long-term care costs if you require them later in life. According to Assisted Living, only about 3% of Americans currently have long-term care insurance. Why so few? Long-term care insurance can be very expensive depending on how old you are when you buy the policy, the coverage you opt for, and other options such as benefits that increase with inflation. 

According to a survey by LifePlans, the average premium for a long-term care policy in 2015 was $2,727, up 154% since 1990 when the same policy premiums were only $1,071. Aside from rising premium costs, the AARP notes other downsides such as a three month waiting period before coverage kicks in and a limit on the amount of coverage you’ll receive. Long-term care policies award a daily amount (about $160/day on average), but they may also limit coverage to a timeframe such as three years as well.

Veterans assistance

Veterans and spouses of veterans may be eligible for up to $3,032 in benefits through the Veteran’s Aid and Attendance program under qualifying conditions. The program is designed to provide assistance for veterans who need to cover assisted living costs and other expenses. It’s important to note that the application process can be long and complex, so you should consider contacting an organization that has experience with the program such as Patriot Angels — who helps veterans streamline their application and cut through the red tape

Sell your life insurance to pay for assisted living costs

Don’t spend your remaining years stressing about finances or putting an unnecessary burden on family members to pay for assisted living costs. Even if you don’t ask for money to pay for care while you need it, states with filial responsibility laws can sue your children after you die putting them under financial strain.

Learn how life settlements can help you cash out early to cover these expenses and make the most of your remaining years. Harbor Life Settlements is here to help you learn more about your options so you can be informed and feel confident in your decision, whatever you decide! Our team of experts will help you determine if you’re eligible to sell your policy, provide you with a cash value estimate, and walk you through the process.

Contact us today to get in touch with our team and find out how much your policy is worth!

Find out how much your policy is worth.

Avery Logan

Avery Logan

Avery Logan is a writer for Harbor Life Settlements with expertise on insurance, finance, and senior care. He specializes in breaking down complex subjects in a way that's easy for people to understand so they can feel informed about what they're reading.

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