Private Payment Options for Senior Living and Home Care
How to Pay for Senior Living in 2024
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For the average American, the “good old days” of living off of retirement funds, pensions, 401ks, and company stock returns aren’t an option anymore. This can make getting by day to day challenging enough. However, when the need for senior living or home health care arises, you might be wondering how to afford the costs. Depending on your needs, age, current medical coverage, income, and/or eligibility for state, government, or local programs you may need to self-pay for part or even all of your senior living expenses or home care costs.
For these reasons, among others, many individuals are developing long-term financial plans early on for elder care needs later in life—and wisely so. Unfortunately, many seniors discover how even medical care can quickly deplete savings. It leaves little resources to survive for the long-term, especially when the time arrives for full-time care. These individuals may qualify for state-funded assistance such as Medicaid to help with expenses, but those relying on Medicaid, traditional health insurance policies, or even veteran’s programs are likely to see out-of-pocket costs. Here are some ways seniors and their families obtain funds to cover private payments for senior living expenses and in-home care.
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Life Insurance Policy Conversions
Several types of life insurance policies can be used or converted into funds for home care or senior living facility expenses before the policyholder passes away. This route may be the best option for seniors looking to preserve their eligibility later on for Medicaid or those who’ve done a great bit of planning ahead for their golden years. Typical policies that qualify for cash conversion include the following.
Pro Tip: Visit our guide to the best life insurance for seniors.
Term Life Insurance
These types of policies are designed to last for a specific term—typically 10, 15, or 20 years depending on the age of the purchaser—and they generally cater to seniors, so they often don’t require physical exams. Essentially, you’re buying a plan that will pay out if you were to pass away during that specified term. Term life insurance itself has no cash value, however, these policies can typically be converted into a permanent whole life or universal one when the term draws near. This option then gives policyholders the power to convert them into cash to pay for senior care needs.
Universal or Whole Life Insurance
Transferring a term life policy into a permanent universal or whole life insurance policy allows seniors to make the coverage last a lifetime in a sense. Furthermore, this conversion can often take place without answering any medical questions or having to deal with a physical exam as long as the transition takes place by a certain timeframe from the term’s expiration or by a certain age—often around 75. This is also a way to boost savings, as these policies build a tax-deferred ‘cash value’ that can be withdrawn against in segments or wholly within the limitations of the policy.
Long Term Care Insurance
This is one of the best types of insurance to have as a senior hands down. Not only do many allow for cash withdrawals upon the policy’s accrued value, but long term care insurance also tends to cover elder health care living costs and certain other related expenses that often aren’t covered under Medicare and other types of supplemental policies. For those aged 65 and above finding themselves with the need for private payment may be able to look into one of these policies to supplement those costs.
Viatical Settlements
Traditionally designed for policyholders with less than two years of life expectancy, viatical settlements involve one ‘cashing in’ their life insurance for a value that’s often 60 to 90 percent of the face value that’s paid out in one lump sum.
Insurance Annuities
Annuities are long-term investments that insurance companies can issue as a method of protecting finances to reduce the risks of outliving your income. One simply purchases an annuity and puts money towards it during their viable income years and receives payouts from those contributions later in life to use as needed.
>>Further Reading: Annuity Calculator
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Home Care Loans
Beyond life insurance options, many seniors who own a home and only need a short-term loan while waiting for other benefits to come through (such as a home sale to pay for care or veteran’s health benefits approval) can take this route. Essentially, the home becomes collateral until the expected lump sum reparations are made by the beneficiary after specified funds become available.
Reverse Mortgages and Home Equity Loans
Another way to use the home to privately fund senior care is to apply for a reverse mortgage. In this arrangement, equity previously paid into the home can often be used to supplement current finances. Those aged 62 years or older on a fixed income may be able to get a loan and defer payments until later. These sums can be distributed in increments or one lump sum.
Finding Affordable Senior Care Near You
There are numerous options when it comes to senior health care, and many are covered by various types of policies. However, those who find themselves in need of additional financing can opt for any of these private payment options. Costs vary even among the same region and locality, so let our experts help you find affordable care near you and further explore your payment options.
