Does long-term care insurance cover assisted living?

Planning for how you'll handle daily care in your later years is a crucial part of financial planning. While your day-to-day care routines won't necessarily directly impact your budget after you're retired, certain factors — like whether you need long-term care assistance — almost certainly will. 

That's because long-term care can be provided in various settings, including at home, in nursing homes or in assisted living facilities, and if you need this type of daily support from a caregiver or medical professional, it typically comes at a high cost. While Original Medicare and Medicare supplemental insurance can help cover many of the healthcare-related expenses you face in your older years, they won't necessarily cover the costs of long-term care.

That's where long-term care insurance can be helpful. Long-term care insurance is designed to help individuals prepare for the potential expenses associated with extended care needs. However, it's important to understand what the long-term care insurance coverage options and limitations are when it comes to assisted living, which offers a more independent living environment while providing assistance with activities of daily living (ADLs) when needed. 

Explore your long-term care insurance options here.

Does long-term care insurance cover assisted living?

The short answer is yes — long-term care insurance can cover the costs associated with assisted living services so you can get assistance with daily care, from bathing to dressing, eating and mobility. However, it's important to note that the coverage for assisted living facilities under long-term care insurance policies can vary significantly. 

And, whether or not your policy covers assisted living will depend on several factors, including:

Policy terms 

Long-term care insurance policies can be highly customizable, so it's crucial to read the fine print when purchasing a policy to find out if yours offers coverage for assisted living. Some policies explicitly state that they cover assisted living, while others may not mention it at all. If the policy does not explicitly mention assisted living, it may still cover it if the services provided align with the policy's definition of covered care.

Find out how long-term care insurance could benefit you here.

Benefit amount 

Most long-term care insurance policies will specify a daily or monthly benefit amount. This is the maximum amount the insurance company will pay for covered services each day or month. When considering assisted living, you should ensure that the benefit amount is sufficient to cover the facility's costs in your area. Keep in mind that assisted living costs can vary significantly depending on location and the level of care provided.

If you need a policy but purchase one with too little coverage, it may not cover all of the costs related to assisted living, which means you'd be on the hook for the excess costs. That can be tough to balance if you're on a tight budget, so it's crucial that you make sure your policy not only covers the costs of assisted living but has enough coverage to keep your out-of-pocket costs for this type of care to a minimum.

Eligibility and qualification 

Most long-term care insurance policies require that you meet certain criteria to qualify for any of the benefits, including coverage for assisted living. These criteria often include a doctor's assessment, which will have a significant impact on whether your policy will go into effect for these types of costs. 

In order to be covered for assisted living, the assessment should confirm that you require assistance with activities of daily living (ADLs) or have a cognitive impairment that requires this type of care. Some policies may also require that you cannot perform a certain number of ADLs without assistance, so be sure to know what the parameters of your policy are.

Waiting period 

Many long-term care insurance policies have a waiting period, also known as an elimination period, which is a specific number of days you must pay for your care before your insurance benefits kick in. Common waiting periods range from 30 to 90 days. 

It's important to understand the waiting period stipulated in your policy and plan for how you will cover the associated costs during that time. If you require assisted living care during the waiting period, it's unlikely that your policy will help cover the costs, so take that into consideration when purchasing a policy.

Duration of coverage 

Long-term care insurance policies will often specify a maximum benefit period, typically in years. This means the insurance will pay for your care up to a certain number of years. To ensure that you're covered adequately, consider your expected length of stay in an assisted living facility and make sure it aligns with the duration of coverage offered by your policy. If your policy runs out before your care needs do, you may need to cover the costs on your own.

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The bottom line

Long-term care insurance can provide valuable financial support when planning for assisted living or other long-term care needs. However, coverage for assisted living can vary from one policy to another. To ensure you have the right coverage, carefully review your policy's terms, benefit amount and eligibility criteria. Consulting with a qualified insurance professional can also help you navigate the complex world of long-term care insurance and ensure you make the best decision to secure your financial future while receiving the care you need. Planning for long-term care is a critical part of comprehensive financial planning, and the right insurance policy can provide peace of mind during your retirement years.