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Can a Nursing Home Take Your Life Insurance Policy?



Long-term nursing care is a significant cost. There’s no way to know when or how long you’ll need care, which leaves many seniors worried about their finances. The extraordinary costs of long-term care spark plenty of questions and a few misconceptions. Namely, can a nursing home take your life insurance policy if you can’t pay your bill? The short answer is no. Your life insurance money goes to your beneficiary. Let’s explain.


Life Insurance Policies and Long-Term Care

Here are the basics. Life insurance is sold through different types of policies. The most common is Term Life insurance which has no cash-out value and only pays after death. Alternatively, some seniors have made investments in Whole Life Insurance, which may be accessed before death to cover significant expenses like long-term care.


If you’re fortunate enough to have the latter, your financial stability may disqualify you from Medicaid coverage. If that happens, you’ll need to find a way to finance your long-term care needs out-of-pocket. We’ll talk more about that later.


Medicare and Long-Term Care

Medicare, the federal health insurance program for senior citizens in the U.S., is not designed for long-term care. This coverage will pay out for temporary nursing facility care, such as seniors rehabbing from a broken hip. If an individual requires permanent long-term nursing care, Medicare won’t provide much help.


Medicaid may provide some assistance for seniors without the financial means to cover long-term care needs, but this is where the information gets a little confusing. For seniors with substantial life insurance policies, there is some concern that a nursing home can take their benefits to pay for the cost of care.


For most seniors, the answer is still no. The nursing home cannot take your life insurance money. However, there are some situations where that’s not the case. Suppose you do not have a named living beneficiary on your policy, and you qualified for Medicare to pay for your long-term care. In that case, the state can seek restitution from your estate and may be awarded a portion of your life insurance benefits.


How to Cover the Costs of Long-Term Care

While Medicaid help may be available to those with significant financial need, many seniors will need to figure out how to foot the bill for long-term care costs at the end of life. Nobody wants to burden their families with added responsibility or financial debt, so for the 65 and above crowd, figuring out how to cover the costs of long-term care is a priority.


There are essentially three options:

  1. Borrow from a Whole Life Insurance Policy

  2. Buy a Long-Term Care Policy

  3. Arrange Private Payments

For seniors with a significant investment in a whole life insurance policy, the option to borrow from that investment can provide the financial means to cover long-term care costs. However, doing so would be an intentional choice. Still, it’s not an uncommon choice, and that’s why there is a lot of confusion about when and how a nursing home might be entitled to life insurance benefits.


Many seniors opt to purchase special insurance designed to pay for nursing care as an alternative. A long-term care policy can cover various nursing services, including home care, community services, and facility care.


These policies are designed with limits in mind. Specifically, limits on how many days (or years) the policy will pay and how much money the policy will pay per day. It’s best to purchase long-term care insurance while you are still relatively early in your senior years and healthy enough to qualify for a policy.


The average cost of long-term care can exceed $8,000 per month. That’s a steep price to afford on social security and retirement savings. Just like anything else, it’s rarely too early to start planning for your future–even when that future looks a little less fun.


The Pros and Cons of Long-Term Care Insurance

The majority of seniors will need long-term care. However, everyone has a different financial situation. Low-income seniors without personal savings or significant assets will likely qualify for Medicaid coverage to pay for their long-term care needs. However, those with financial means may be better off investing in a long-term care insurance plan.


On the upside, long-term care insurance can help cover the costs for an average of two to five years of long-term care, making it a feasible option for anyone who can afford the premiums today. However, on the downside, the cost of long-term care insurance can be steep. And there is no guarantee that the premiums won’t increase over time. Plus, your current health is a significant factor–some seniors may not even qualify for long-term care insurance.


The Key Takeaways on Nursing Homes and Life Insurance

So, as you can see, the simplest answer is no. A nursing home is not entitled to any portion of your life insurance benefits unless you choose to use these funds to pay for your care or fail to name a beneficiary for your policy. It’s fairly common to be unclear on the ins and outs of paying for long-term care, and there are plenty of assumptions out there.


Keep in mind:

  • The majority of senior citizens aged 65 and older will need long-term care.

  • The biggest reason seniors avoid purchasing long-term care insurance is the price and a lack of information.

  • CIIG can offer simplified long-term care policies or a hybrid policy that adds a long-term care rider to your life insurance policy.

  • There are many ways to pay for your long-term care. Insurance is one option, but it’s not the only option on the table.

Long-term care insurance is definitely high on the list if you're thinking about your end-of-life needs. Nearly 70% of all seniors will need some type of nursing care in their lifetime. There’s no way to know for sure if that need will be permanent or how long it will last. Our friendly agents are ready to talk to you about your life insurance and long-term care insurance options. Give CIIG a call today.