You can pay for long-term senior care with several different financing options, which we discuss in detail below. The one that works best for you depends on your specific situation, including short-and long-term needs. You might even combine several different options to make sure you can meet your own needs as well as those of the person you’re caring for.
1. Home Equity Conversion Mortgages (HECM)
HECMs are government-backed reverse mortgages that allow seniors over 62 years old to borrow against the amount that they own in their house without having to make payments until they sell their home. With a reverse mortgage, your lender gives you either a lump sum, a line of credit that the borrower can access when needed or monthly payments.
Borrowers repay an HECM through the sale of their home, whenever that time comes. The government considers these loans non-recourse loans, meaning that it forgives any remaining debt that the sale doesn’t cover.
2. Home equity loan or line of credit
Similar to a reverse mortgage, home equity loans and lines of credit allow someone to borrow against the value of their home. Home equity loans come in lump sums while lines of credit known as HELOCs give you access to a fixed amount of credit.
The main difference between these and a reverse mortgage is that repayment begins as soon as you borrow the funds. Interest rates are relatively low, since it’s secured, but you could risk losing your home if you can’t make payments.
3. Personal loan
You can use a personal loan to cover any legitimate expense, including senior care. You’ll get access to a lump sum, which you pay off in monthly repayments plus interest and fees over time.
Personal loans work well for covering one-time expenses and aren’t typically a great long-term solution since future costs can be difficult to predict. You might want to consider a personal loan to cover the cost of a medical procedure.
4. Assisted living and bridge loans
If your family has an unexpected assisted living cost that needs to be taken care of immediately, this might be the option for you. These loans are made for short-term financial gaps when you’re waiting for longer-term solutions to come through — like the sale of a house or veteran benefits.
With an assisted living or bridge loan, you can typically get approved in as little as one day. You’ll have up to 12 months to pay it off, and the costs can sometimes be split between as many as six people, easing the burden on any one individual. These loans are unsecured and lenders might require all co-applicants to have good credit to qualify for a competitive rate.
5. Life insurance policy conversion
If the senior citizen who needs care has a life insurance policy, they have several options to use that to cover senior care costs.
- Life insurance policy conversion. Seniors can convert a life insurance policy into a long-term care benefit plan to cover expenses like home health care and assistance living. Typically, they can get a percentage of the policy’s face value to cover costs. However, the family generally only gets between 20% and 50% of the death benefit amount — the pay out to family members.
- Life settlement. Policyholders can also collect a lump sum by cashing in their life insurance policy. They won’t have to continue premium payments, but they might not get the full value of their policy.
- Viatical settlement. Similar to a life settlement, a viatical settlement allows terminally ill patients to cash in their policy in exchange for a fixed amount. Viatical settlement amounts are typically higher than life settlements.
- Death benefit loan. A loan is taken out against the value of the death benefit. If you can’t repay your loan, your death benefit won’t be as high.
- Accelerated death benefit. Terminally ill patients who don’t want to cash in their entire death benefit can get a portion of it in advance to pay for healthcare and hospice costs with this option.
6. Long-term care insurance
If the person needing care already has long-term care insurance — only about 10% of seniors do — then they can use that to cover their senior care costs. If not, this won’t help much — it can be extremely expensive unless it was taken out long in advance. Experts generally recommend that you purchase a long-term plan for yourself before you’re 60 years old. That’s because the older you are, the higher the monthly premiums will be.
If you have one of these plans, you’ll have a certain amount of your daily expenses covered. The payout is generally higher for those living in assisted living or nursing homes.
7. Other government benefits
Seniors can also use Medicare to cover medical expenses, and veterans can qualify for additional benefits from the Department of Veteran Affairs (VA). In fact, the VA can provide as much as $2,200 per month to qualified seniors living in assisted living homes or to get funds to pay for at-home assistance like personal attendants. Like with Medicaid, these benefits vary from state to state, so you’ll want to check with your local regulations first