How Can I Pay for Assisted Living?

When moving to an assisted living community, older adults and their families may begin to wonder how they will be able to afford the transition. Assisted living fees can be expensive, putting additional stress on those considering the move.

There are many options to consider for funding assisted living costs. Depending on your insurance plans and other benefits, there may be several possibilities available.

Paying for Assisted Living

When deciding how best to pay for assisted living, consider the following options.

Savings or Personal Income
Paying for assisted living services through savings or personal income, sometimes referred to as “private pay,” may seem obvious, but it’s both the easiest and most challenging. It is the most straightforward way to pay for assisted living, as it requires little additional paperwork or research. However, for many individuals, it’s not possible to pay for assisted living solely using personal income.

Consider cashing in on personal investments, such as 401k plans, IRAs, or cash value life insurance to pay for assisted living. Family members may also decide to chip in or pool funds as a group to assist in paying assisted living facility fees.

For some, this option isn’t a long-term solution, as assisted living facility costs can use up personal savings fairly quickly. Additional sources of funding are available to supplement paying out of pocket.

Long-Term Care Insurance 
If you have long-term care insurance, you may be able to use it toward assisted living. Check to see if your policy covers home care, as often this will also cover assisted living facility fees. Sometimes, long-term care insurance only covers certain types of facilities, so make sure the facility you are looking at will be covered by your plan.

Sometimes, working with your insurance company to cash in on your benefits at assisted living can be tedious. You may be denied the first time you apply for coverage, but many assisted living facilities have an advocate on staff that has experience working with insurance companies. Check if the community you are considering has an advocate and get their help making a claim.

Life Insurance
It is sometimes possible to cash out a life insurance policy to help pay for assisted living facility fees. While it depends on the policy, it may have a cash value, or the life insurance company may offer to buy back the policy for a percentage of it’s worth.

Alternatively, you may be able to change the policy into a long-term care insurance policy. You would only receive a percentage of the face value of the original plan, but it would make the funds available now.

Veterans Benefits
Many veterans may qualify for benefits from the Veterans Administration that can be used to pay assisted living costs. If the veteran has a disability or obtained injuries during service, there will almost definitely be coverage available from the VA.

Look to see if a Non-Service Connected Improved Pension with Aid and Attendance benefit is available to you. This benefit is available to veterans or surviving spouses that have a current medical condition and low income. The medical condition does not need to be related to their time in the service. While this benefit does have some strict requirements, if available, it may be able to cover a good portion of assisted living expenses.

Home Equity
If the house you or your loved one is moving out of will be empty, you may be able to sell the home and use the profits to pay for assisted living.

If you are not ready to sell – for sentimental or logistical reasons, perhaps – considering renting it out instead. While this may require family or a management company to manage the rental while the senior is in assisted living, the monthly rent may help generate additional funds.

Reverse Mortgage
Taking out a reverse mortgage may be an option if someone, such as a spouse, is still planning to stay in the home after their loved one has moved to an assisted living facility. With a reverse mortgage, you can borrow money on the equity you have built in your home.

The borrowed money will need to be paid back in the future. Usually this is done by selling the house. Because of this, a reverse mortgage is usually not a good idea for those that would like to keep the house in the future.

Bridge Loans
Bridge loans are short-term loans that can be used to cover the immediate expenses of moving to an assisted living facility. They usually are available for up to $50,000 in compensation. Bridge loans can be a good choice if you are waiting to receive money from selling a home or for other funding requests to be approved. It is expected that they are paid back quickly, so they are not a good option for long-term funding.

For those without savings and a low income, you may be eligible for help paying for assisted living facilities through Medicaid. The rules and compensation vary by state, but many states allow for part of the assisted living facility payment to come from Medicaid. Often, Medicaid does not cover room and board, and many communities are limited on how many residents they can accept who have Medicaid or similar funding as a payment source.

Medicaid payments are based on financial need and availability. They are usually considered a last resort, as it is difficult to obtain the money needed to cover all expenses.

Considerations When Paying for Assisted Living

When looking for options for funding assisted living, consider the following.

Elderly couple looking at documents
There are many additional factors to consider as you plan how you’ll pay for assisted living.

Medicare won’t pay for assisted living
Medicare may cover a short-term stay in a rehabilitation facility, but it will not cover any of the costs associated with assisted living facilities long-term. You will need to make other financial arrangements, such as from one of the sources above, to pay for assisted living.

Payment can come from multiple sources
You do not need to rely on only one source of income to pay for assisted living. Many combine the benefits from multiple sources to cover the full costs. It can be very difficult to pay for assisted living facilities with only one source of funding.

You often get what you pay for
Assisted living facilities can be expensive, but you are paying for quality professionals and amenities to stay safe and comfortable. When choosing a facility, consider:

  • The amenities provided,
  • The training of the staff,
  • That services they provide, and
  • The general look and feel of the establishment.

The total price should be taken into consideration, but it shouldn’t be the end-all decision maker. Read more about what to look for in activities and more when choosing an assisted living community.

Paying for assisted living facilities can seem daunting, but there are several sources available to those who are looking for additional options. 

Start planning early by researching the funding sources that are available for you to make the transition as seamless as possible.