Insurance for Retirement Homes: Options to Ease Financial Burdens

From the start to the end of 2024, an estimated 4.1 million Americans will have hit retirement age, as reported by CBS News. In daily figures, that translates to 11,000 Americans turning 65 each day!

If you or an older loved one is also nearing retirement age, you may have wondered if there is insurance for retirement homes. The good news is that the answer is yes; you have several options for eldercare financial planning and long-term support services.

So, join us as we explore retirement home coverage and long-term care insurance to help you or your older loved one pay for living and care costs in your golden years.

Long-Term Care Insurance

Long-term care insurance (LTCI), also called "nursing home insurance" or "senior care insurance," is a special type of policy with benefits that pay for elder care services. Depending on the policy, it can cover the costs of retirement and residential care services, including those provided in nursing homes, assisted living, and memory care senior living communities.

Senior living communities deliver specific and varying levels of elder care services. However, they also share similarities, such as providing housing and daily meals to residents. They also organize activities and events for older adults to socialize and stay physically and mentally active.

Here's a breakdown of each type of retirement/senior living community and the services they provide.

Nursing Homes

Nursing homes, also called "skilled nursing communities," are retirement homes offering 24-hour care and assistance for seniors who need more help than they can get at home but don't need to stay in a hospital. Examples are older adults who may have a severe health condition or disability that makes them unable to perform activities of daily living (ADLs) independently. The ability to perform ADLs, from bathing to moving and dining, makes a person independent.

Assisted Living Communities

Assisted living communities are retirement communities catering to older adults who need help with one or more ADLs but can still do some of these tasks independently. Examples include:

• Showering or bathing
• Mobility (e.g., getting to and from the bed or a chair to the toilet or bathroom)
• Personal grooming and hygiene
• Selecting appropriate clothes and putting them on
• Continence care
• Medication management
• Meal preparation and dining

Not all older adults need 24/7 nursing care, but many require assistance with one or more ADLs. The American Psychological Association (APA) reports that about one in five adults aged 65 to 74 need help with such integral activities. The rate is higher in the 85 and older population: 40% of men and half of women within this age bracket require ADL assistance.

If you or an aging loved one falls into this category, consider purchasing a retirement community insurance policy that covers assisted living costs.

Memory Care Communities

According to a 2024 news report from MedicalXpress.com, a 2022 survey revealed that 4% of polled adults 65 and older have received a dementia diagnosis. As with many age-related conditions, the prevalence is higher in older adults. Among those 85 and older, 13.1% have received a diagnosis of dementia.

Memory care communities serve older adults with memory-related problems, such as dementia or Alzheimer's Disease (AD). In these communities, a team of care specialists professionally trained and experienced in such conditions attends to their residents' unique needs.

Some senior housing insurance policies cover part of the living costs in a memory care community. Not all do, though, so please check a policy's terms and conditions, including its inclusions and exclusions, to confirm that it covers memory care services.

Life Insurance Policies

Some life insurance providers now offer policies with long-term care benefits for seniors, usually cash-based. Depending on the policy, it can be an accelerated death benefit or a life settlement.

Both benefits allow policyholders to "encash" part of their benefit amount. They can then use the proceeds to cover the costs of transitioning to and living in a retirement or senior living community.

Accelerated Death Benefit

An accelerated death benefit is a tax-free cash advance that policyholders can obtain while still alive. The insurer subtracts the cash advance from the proceeds beneficiaries receive when the insured passes away. The benefit is usually available to policy owners who must live long-term or permanently in a residential care or senior living community.

Life Settlement

Some insurance policies allow owners to "sell" them for cash, also known as a "life settlement" benefit. In this scenario, the policyholder exchanges their policy's current value for money. They can then use the taxable proceeds for personal reasons, including paying for retirement homes and long-term care.

Life insurance policies offering life settlement benefits have specific age requirements, though. For example, the insured may only be able to sell their policy from age 70 onward. It may also depend on their gender; some insurers have lower age requirements for males than women.

Insurance Annuities

Annuities are contracts with insurance companies that can help you or an older loved one pay for a portion of the cost of long-term care services. It involves you paying the insurer a series of or a lump sum contribution, and in exchange, they'll make regular payments to you for a specified period. You can then use the money to cover your expenses in a senior living community.

Annuities can be helpful, but they generally don't pay enough to cover all residential care services. However, they can still be a good addition to your insurance-related financial resources while in retirement.

Insurance for Retirement Homes: Consider These Top Options

From long-term care insurance plans to life insurance plans and annuities, these are your top options for insurance for retirement homes. They can help pay for the costs you'll incur while living in a senior living community, making the transition easier on your pockets.