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Can Assisted Living Facilities Accept Life Insurance as Payment?
Date Updated: July 26, 2024
Written by:
With over a decade of dedicated experience, Andrea Miller boasts an extensive background in healthcare writing and editing. Her expertise spans various facets of the healthcare industry, with a particular focus on nursing, senior care, Alzheimer’s disease, and public health. Andrea has also contributed her editorial talents to reputable publishers in the Philadelphia region, complementing her extensive freelance work.
Reviewed by:
Kristi Bickmann, a licensed Long-Term Care Specialist, represents top-rated "Traditional" & "Hybrid" LTC companies. Serving associations such as the American Nurses Association, she's a licensed insurance agent in 27 states. Specializing in insurance products for seniors, Kristi helps hundreds of families every year protect assets, retirement, and loved ones. She understands aging concerns firsthand, having assisted her own parents. Kristi ensures accuracy on topics about senior long-term care and its consequences.
Assisted living facilities can’t accept life insurance as payment. However, many people cash out their life insurance policies to cover the cost of assisted living care. You have a few options if you’re interested in using insurance to pay for assisted living.
How do you pay for assisted living with life insurance?
You can pay for assisted living with life insurance by cashing out your policy, using accelerated death benefits (if your policy offers this option) or purchasing a product that combines long-term care and life insurance. Selling your policy for its current cash value becomes an option when you reach age 70 as a man or age 74 as a woman. The IRS taxes the total as income.
If you’re an adult with a terminal illness, you have the option of selling an insurance policy to a third party for cash, known as a viatical settlement. Hybrid life insurance and long-term care policies typically pay a percentage of the death benefit toward assisted living. Some life insurance policies include accelerated death benefits, allowing you to take a tax-free cash advance to pay for assisted living.
Howmuch do you get when you cash out a life insurance policy?
The amount you get when you cash out a life insurance policy depends on the type of policy. If your policy has a life assurance benefit, you get up to 50% of its value to use for long-term care. When you sell the policy to a third party or back to the insurer, you receive 50% to 75% of its value.