Financing Long-Term Care

People with low income and few assets may be eligible for long-term care through Medicaid or other government assistance programs. Others may wish to purchase long-term care insurance when they're younger to protect their assets later in life. However, this coverage can be costly — often several thousand dollars per year, depending on how old you are when you begin paying for coverage. Plus, those with pre-existing conditions may be denied coverage.

Long-term care usually consists of some combination of skilled care, intermediate care and custodial care. Skilled care is the most expensive service, involving round-the-clock care from a registered nurse under the close supervision of a physician. Intermediate care is less intense and includes occasional nursing and rehabilitative care under the supervision of medical personnel. Custodial care is home care. It provides for the basic nonmedical needs of a patient such as cooking, bathing and other day-to-day needs. This can help if you have a family member living under your roof but you are unable to support their day-to-day needs on your own.

Fortunately, there are other options to pay for long-term care.

Using a Life Insurance Policy
You can use your life insurance policy in a number of ways in order to finance elder care:

• Linked or Asset-Based Life Insurance – You pay one large premium payment up front, or a few very large payments over a few years, to cover your long-term care services. If you never need to use your long-term care coverage, your beneficiaries still receive the death benefit and you can also get your money back if you decide years later that you don't want the policy.


• Accelerated Death Benefit – This is a benefit that can be added to a life insurance policy. You dip into your death benefit to pay for long-term care costs. If you want to leave an inheritance, however, you may want to reconsider using your life insurance death benefit to pay for long-term care services.


• Life Insurance Settlement – You can sell your life insurance policy and use that money however you want, including to pay for long-term care services. Be aware that you'll have to pay taxes and there will be no death benefit for your heirs to inherit.


• Viatical Settlement – This is only an option if you are terminally ill and have a life expectancy of two years or less. With this option, you sell your life insurance policy to a viatical company that pays you a percentage of the death benefit on your life insurance policy. You don't pay taxes on the money you receive from the viatical company, but your heirs do not receive a death benefit.