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Ways to pay for long-term care

It is a fact that everyone will eventually age and suffer physical decline. While everyone ages in different ways and some people will suffer health problems or physical infirmities that others do not, no one knows for sure what will happen in the future. It is for this reason that long-term planning is so important. Long-term care can refer to many different things-residence in a nursing home, assistive support and other supports-but what is certain is that long-term care will come with certain and often significant costs.

One of the reasons that people may procrastinate when it comes to long-term planning is worry about the costs of medical expenses and long-term care solutions. Planning ahead can alleviate some of the worry, however, and can make people better equipped financially when the need arises. There are basically three different ways that people can cover the costs connected with long-term care: long-term care insurance, life insurance and private funds.

Long-term care insurance is a type of insurance that is specifically designed to help the insured cover the costs of residing in any kind of assisted living facility, nursing home or community housing program. In addition, this kind of insurance covers a range of assistive services and supports that can enable people to remain in their homes for longer periods of time. The cost of buying long-term insurance is dependent on a range of different factors, including how much coverage the policy provides (i.e., a daily maximum dollar amount for care, the maximum number of days an insured can receive benefits and a maximum lifetime benefit amount), as well as a person's age at the time he or she buys the policy and what kinds of extra benefits an insured chooses.

If a person has life insurance, he or she may also be able to use the life policy to pay for long-term care. One of the most common ways that life insurance can help pay for long-term care is by selling the policy when it is no longer needed and using the proceeds to pay for care. If a life insurance policy has accelerated death benefits, the insured also can also the policy to pay for care by receiving a cash advance on the policy in certain situations. Finally, private funds-in the form of income and savings, home equity (reverse mortgage), annuities or mortgages-can help people cover the costs of long-term care.

Source: U.S. Department of Health and Human Services, "Costs & How to Pay," accessed April 13, 2015

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