Does Long-Term Care Insurance Cover Assisted Living?


Imagine for just a moment that your mom is struggling with day-to-day activities like cooking, cleaning, and laundry. She has a few minor maladies, but you don’t consider her ill, and she doesn’t require a high level of daily care. Mom’s not ready to move into a nursing home, but you’ve been observing her, and you’re concerned about her carrying a bag of groceries or walking up the stairs. An assisted living facility may be the perfect place for her.

Jump ahead to these sections:

To make sure everyone’s on the same page as we talk about long-term care insurance and assisted living, let’s have a good working definition of assisted living. 

An assisted living facility is a type of residence or housing that older adults move into when they’re reasonably healthy but require a bit of extra help with some of the activities of daily living. These facilities typically provide room and board, meals, and a certain level of nursing oversight. Assisted living facilities are less comprehensive than a traditional nursing home, which generally provides skilled nursing services around the clock.

Assisted living is an excellent intermediate step on the elder-care continuum. But it’s expensive, with the monthly cost of care costing over $4,000. The big question is: who’s going to pay the bill? 

Does Long-Term Care Insurance Typically Pay for Assisted Living?

The answer to this question is much the same as it is for any insurance, such as health or auto insurance: it all depends on what’s written in your policy.

Newer policies are much more likely to cover assisted living than older policies. They typically pay for a nursing home, adult daycare, and assisted living. You do need to watch that your policy isn’t designated as “facilities only,” which means they won’t cover any in-home assisted living services.

Not long ago, when many people purchased their long-term care insurance policies, policies were primarily written to cover nursing homes because assisted living facilities were not nearly as prevalent as they are today. 

You must research long-term care insurance or read up on your existing policy. The last thing you want to have happen is to have the insurance company tell you that they aren’t going to cover your assisted living costs and that you’re going to have to pay for them out-of-pocket.

This will not only be painful for you financially, but it will be particularly unsettling if you’ve spent decades paying for a costly policy. Unfortunately, many people that bought their long-term care insurance in the late 1980s and early 1990s have found this to be the case.

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When Doesn’t Long-Term Care Insurance Cover Assisted Living?

The most common reason that claims for assisted living are denied is that the insurance company doesn’t approve the facility. Insurance companies will sometimes deny payment because an assisted living facility doesn’t meet the policy's standards. Sometimes it’s because the facility is too small or it doesn’t have adequate staffing.

Some states and insurance companies require licensed assisted living facilities to have RNs on staff 24/7. State requirements also vary in the amount of education that facility directors must have like requiring that they have a degree in health care administration.

State regulations also vary about how other workers in facilities are trained, and there are laws about facility cleanliness, organized social activities, meal preparation, and much more. Falling short in any of these areas could result in a claim being denied by the insurer.

State licensing is also a concern to some insurance companies. Some assisted living facilities don’t meet the insurance company's approval because they aren’t licensed appropriately. 

To find an approved facility, policyholders or their power of attorney should contact their insurance company and request a provider inquiry. Some insurance companies will review up to three providers per inquiry and share their findings with the insured.

If, after reviewing those three facilities and the insured isn’t interested in any of them or finds out the facilities wouldn’t be covered under their policy, the policyholder can then request another inquiry into three different providers.

Policyholders should call their insurance company before deciding on a particular facility and confirm that it meets all of the long-term care policy requirements. If there’s any doubt in your mind, be sure to inquire before you commit.

Assisted Living Payment and Medicare or Medicaid vs. Long-Term Care Insurance

Assisted living is primarily paid for by someone’s long-term care insurance or personal assets. Medicare doesn’t cover long-term support and services.

Medicaid may cover some costs, but rules vary from state to state. Each state determines how residents can use Medicaid to pay for long-term care in community and home-based settings, including assisted living communities. 

Many people rely on Medicaid to cover their costs, but they’ll usually need to spend down their assets before they qualify for Medicaid coverage.

The majority of long-term care policies will cover expenses at an accredited assisted living community, depending on the policy provisions. Most facilities are “private pay” and are covered by long-term care insurance.

Is Buying Long-Term Care Insurance Worth It?

When considering if long-term care insurance is worth the cost, you need to consider two important things:

  1. Your risk of needing long-term care
  2. What that care would cost you without insurance

According to the U. S. Department of Health and Human Services, a person turning 65 in 2021 has a 70% chance of needing some type of long-term care. It also states that one in five people will need that care for longer than five years. On average, women need care longer (3.7 years) than men (2.2 years). The average length of long-term care is just about three years.

You also have to consider the cost. Medicare may cover short-term care in a nursing home after a hospital stay, but it doesn’t cover long-term care.

Genworth Insurance Company, a long-term care insurance provider, conducted their annual survey of costs of various long-term care services and found these to be the median prices in 2020:

  • Adult daycare: $20,285
  • Assisted living community: $50,070
  • Homemaker services: $53,024
  • Private room in a nursing home: $105,266
  • Semi-private room in a nursing home: $92,860

All things considered, you’ll likely need long-term care, and it’s going to be expensive.

Surprisingly, fewer and fewer insurance companies offer long-term care insurance to consumers, and fewer people are interested in it because premium rates have skyrocketed over the past few decades. It seems that anything related to healthcare is twice as expensive as it used to be, and it takes twice as long to find a company offering adequate coverage.

Whether or not you buy long-term care insurance is going to depend on your personal financial situation. If you have enough savings to pay the above-quoted costs out-of-pocket, then it’s probably unnecessary for you to pay insurance premiums.

Bear in mind that the numbers quoted above are median prices, meaning that half of the prices for that care are higher and half are lower. 

Your actual cost of care at a facility depends on the amount of help you need. For example, if you need memory care services in addition to daily housekeeping and food services, your costs could exceed the median costs.

Where you’re located also matters. If you live in a state that’s heavily populated by seniors and that has many senior living communities with a relatively high turnover rate, and you only need basic care, you might find a room at a nursing home to be much lower in price.

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What Are the Benefits of Long-Term Care Insurance?

Cost savings is the primary benefit of purchasing long-term care insurance. What you’ll pay in premiums for the coverage is a lot less than what the care would cost you without insurance. And, with insurance, you’ll be able to preserve your assets, savings, and financial independence.

Other benefits of long-term care insurance include:

Friends and family are relieved of caregiving tasks 

With insurance coverage helping pay for your long-term care needs, there will be no reason to rely on your friends, children, or siblings for help. 

Expanded range of services received 

You could receive care from home health aides or visiting nurses, time in adult daycare centers, home-delivered meals and chore services, and respite services for caregivers.

Increasing care options 

If Medicaid pays for your care, a nursing home is your only choice. If you have long-term care insurance, you’re able to decide where you receive care, whether it be at home, in an assisted living facility, or a nursing home.

What’s The Best Age to Buy a Policy?

Most insurance agents that are well-versed with long-term care insurance will tell you that the best time to buy it is when you’re in your mid-50s. If you wait much longer than that, insurance companies raise the rates because they know that after age 55 is when most people start to develop more serious health issues. 

Final Thoughts: Shopping for Long-Term Care Insurance

Here are a few things to keep in mind when you’re looking for the right plan:

  • Ask a lot of questions. It will all start to make sense when you spend time talking with your agent and asking them questions. Whether it’s future premium rate increases or covered services that you’re unsure about, ask and re-ask until you’re comfortable.
  • Get at least three quotes. Sometimes you can buy a nearly identical plan for a lot less, depending on the company. Compare policies and see what’s covered, the benefits and limits, and the premiums. 
  • Take your time. Don’t let an agent rush you. Make a list of all the features of each plan and take the time to compare them. Go over all of the coverages with a friend or family member you can trust.
  • Think ahead. Once you find a policy you like, consider the next few years and what it will look like in terms of coverage and payment. If you feel confident with your final decision, fill out the application and get the ball rolling. Someday when you use your coverage, you’ll be glad you did.

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