Financing Long-Term Care: Your Options Explained

Matthew Mullowney |

It’s not always pleasant to think about who will take care of you when you’re no longer able to take care of yourself, but planning ahead is a necessary part of getting older. The more prepared you are—emotionally, logistically, and financially—the easier it will be for you to transition into long-term care if and when it’s needed. 

Staying informed on your options is the first step to planning. Here are some ways you may be able to finance long-term care. 

Personal Savings 

If you’re planning ahead for long-term care, start to set aside a portion of your savings to help. Paying for long-term care with personal savings is perhaps the best method of financing, simply because there are no special requirements, limitations or premiums involved. This is especially true for those with pre-existing conditions who might not qualify for certain types of insurance or other financing options. 

Long-term care can cost anywhere from $20,000 to $100,000 per year, depending on the type of care you need, so while it’s good to save as much as you can, it may not be possible to fund care with personal savings alone. 

Government Programs

Government assistance for long-term care is available for certain populations. If you have limited income, a pre-existing condition, or a veteran status, you may be able to access benefits from one or more of these programs to assist with your long-term care expenses: 

Long-Term Care Insurance 

Another common option for financing long-term care is getting long-term care insurance. The exact coverage for this type of insurance depends on your policy, but there are options ranging from comprehensive—including home and hospice care—to more limited nursing home-only coverage. 

Just like other insurance policies, it’s easier to acquire long-term care insurance at a reasonable premium when you’re younger and have less risk of needing long-term care. If you’re in poor health or are already receiving end-of-life care you may not qualify for this type of insurance.

You may also be able to access long-term care coverage with your life insurance policy. If you already have life insurance, check in with your broker for coverage details. If you’re still shopping around for life insurance, ask about long-term care when considering your options. 

Other Financing Options  

If you’re still worried about financing long-term care, there are other options available, although they may come at a cost to your financial health. Reverse mortgages and life settlements can both be beneficial, especially for those who are struggling with a fixed income. 

A reverse mortgage is a type of home loan that lets the owner convert part of their ownership value into cash. You must have existing home debts paid off before you can take advantage of this option, and note that the loan must be repaid if you sell the home, no longer use it as a main residence or die. 

A life settlement, on the other hand, is a method of selling your life insurance policy to a third party. You won’t have repayment to worry about, but the third party will become your beneficiary and will receive your death benefit when you die. 

If you’re weighing your options when it comes to financing long-term care for the future, reach out to a financial professional for help. A financial professional can educate you on the pros and cons of each financing scenario and guide you through the best course of action for your specific needs. 

*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2023 Advisor Websites.