How to Buy Assisted Living Insurance

Assisted living facilities are not covered by Medicare. Assisted living insurance can cover some of the costs.
i Keith Brofsky/Photodisc/Getty Images

Assisted living insurance comes in the form of long-term care insurance that specifically covers assisted living costs. Assisted living facilities typically cost between $2,000 and $3,000 per month, which is much less than the costs of nursing homes. Expenses for assisted living facilities, however, are not covered by Medicare. Long-term care insurance or assisted living insurance can cover some or most of the costs, reducing the amount you must pay on your own. As with deciding on any financial or insurance product, you must do your research, find a reputable company and determine what you can avoid.

Determine Need

Before buying long-term care insurance to help cover assisted living costs, you must figure out if you will need it and can afford to get it. If you don’t have family or others who can and will care for you when you can no longer live on your own, it may be a good idea to get assisted living insurance. Assisted care insurance on average costs $34,000 per year, according to the 2009 Cost of Care Survey by Genworth Financial Inc., while the average assisted living resident makes about $19,000 annually. Insurance, along with savings, can help cover the difference.

Determine Affordability of Premium

After determining that you will need assisted-living insurance, you must figure out how much you can pay into it. You can buy this insurance policy at 18, but experts from the Assisted Living Federation of America suggest you start your research at 40 and buy at age 50. The younger you buy your policy, the lower the premium. Remember that you will be paying the premium for decades, so you must make sure that you can continue to pay them after retirement. Examine your policy to see if it has attained-age premiums -- those that go up when you hit a certain age. The policy should indicate how much the increases will be. Avoid policies that don’t.

Determine Coverage

Not all long-term care insurance covers assisted living facilities. Whatever policy you choose, make sure it covers assisted living. Once you ensure that it does, figure out how much care and medication management the policy covers, on top of the "rent" coverage, as the rest will come out of your pocket. No insurance policy will cover the full cost. Most assisted-living insurance policies provide a benefit of $100 to $150 per day, and the average assisted living facility costs $93 per day.

Other Benefits

Other benefits you should look for are inflation protection of 5 percent or more, as assisted living costs have been going up about 4.7 percent annually, according to the 2009 Cost of Care Survey. Look for a policy that is tax-qualified so you can deduct the premiums you pay on your taxes. And because you may not need to use assisted living insurance at all or only use it for a few years, see if the policy includes a provision that allows you to use it at different times: For example, you might you use it after an illness for a year, return home for a year, and then re-enter the facility. You should also look for a step-down provision that enables you to pay a lower premium, if needed, for a smaller benefit amount; a non-forfeiture provision that enables you to get a small refund if you drop your coverage; a reduced paid-up provision that allows you to drop the policy but still collect some benefits; a death refund to your estate if you die; and a survivorship provision that allows your spouse to use the policy if you die.

Choose an Insurance Provider

As you look for an insurer, remember that a good insurance provider will be financially stable. You can check on a company’s financial strength and stability through an independent rating service, such as AM Best. Along with checking insurance agents on your own, you can refer to your company to see if it provides this insurance or partners with a company that does. Many professional organizations and other nonprofits also provide this insurance and are worth consideration. Try to compare at least three companies and ensure they and their policies cover all your needs.

the nest