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How Does Assisted Living Insurance Work?
Date Updated: July 26, 2024
Written by:
Rachel Lustbader is a writer and editor with a background in healthcare and technology. Her work has been published on websites including HealthCare.com, BiteSizeBio.com, BetterHelp.com, Caring.com, and PayingforSeniorCare.com. She studied health science and public health at Boston University.
Both of Rachel’s grandmothers had very positive experiences in senior living communities, and Rachel saw firsthand the impact that kind, committed caregivers and community managers can have on seniors’ and their family members’ lives. With her work at Caring, Rachel hopes to help other families find communities, caregivers, and at-home products that benefit elderly loved ones and make life less stressful for family caregivers
Assisted living insurance works by paying for specified services. Policies vary; some reimburse seniors for care costs, while others provide an indemnity cash sum that individuals can spend as they choose. Additionally, some assisted living facilities accept payment directly from long-term care insurance providers, so seniors don’t act as intermediaries.
Assisted living insurance overview
Two main types of insurance cover assisted living: traditional long-term care insurance and hybrid policies. The latter combines long-term care coverage and basic life insurance. For each type, policy conditions differ, depending on the provider and premium. Additionally, some policies apply to limited settings, so individuals must ensure they include assisted living facilities.
Many companies set out minimum contract periods, whereby individuals aren’t entitled to benefits until they’ve held the policy for a set time. Additionally, most have elimination periods, meaning seniors must pay all care costs for a specified timeframe — often three months — before insurance payments begin.
Benefit triggers, coverage limits and considerations
Seniors can claim on their long-term care plans when they reach benefit triggers — typically needing help with at least two activities of daily living to get payments while residing in an assisted living community. Some plans cover dementia care for those diagnosed after starting their policies; in such cases, cognitive decline is also a trigger. Companies may ask a doctor to confirm a senior’s care needs. Daily or monthly limits apply, so insurers will pay out up to an agreed limit for care expenses.
Seniors must pay additional costs from other resources. Moreover, most policies have a fixed lifetime; some companies end payments after reaching a particular figure, and others stop paying after a specified duration.
Other ways to pay for assisted living
In the United States, assisted living has a median monthly rate of $4,500. However, fees vary widely across the nation. Long-term care insurance provides a financial safety net for many older adults. Still, policies don’t always cover total care costs for a senior’s remaining years, so individuals often need other resources. Options include state Medicaid waiver programs, savings, pensions, VA benefits and reverse mortgages.