Selling a home at a time when a long-term care policy’s benefits are triggered can potentially be used to cover the cost of moving into an assisted-living facility in retirement, according to experts.
Typically, a long-term care policy’s benefits are activated when a covered individual can no longer perform certain activities of daily living, such as bathing, dressing, or eating.
“The sale turns home equity into cash that can pay a community’s entry fee or rent, while the policy’s daily benefit helps offset care expenses,” Waterlily CEO and co-founder Lily Vittayarukskul told NTD. “This lets retirees move into a preferred setting sooner and could still leave a cushion for other goals or gifts while they are privately funding care.”
Waterlily is an online platform that uses artificial intelligence to predict future care costs.
Long-term care insurance is an often overlooked, secret weapon to a strong retirement funding strategy, according to Assisted Living Magazine founder and CEO Jeremy Clerc.
“It’s a strong tool to fund retirement costs without depleting savings,” Clerc told NTD. “By paying premiums over time, you essentially build a dedicated fund that will cover these hefty care bills later on—sparing your personal savings and giving you peace of mind.”
For example, the cost of a home health aide increased 3 percent to an annual median cost of $77,792 while the cost of residing in an assisted living community increased by 10 percent to $70,800 per year.
The detriment to long-term care insurance, however, is paying for a policy that may never be used.
“If someone never has a long-term care incident, then the policy provides them with no benefit,” Orcus CEO Nic Adams told NTD.
As a result, Adams advises exploring more flexible options such as hybrid life-long term care policies, which provide a death benefit or cash surrender value should no care be needed.
“There are also cash indemnity policies that give a set amount of money on a scheduled basis, regardless of how much care is needed, which permits the insured to use those funds for other living expenses,” Adams added.
Washington-based home care company Caringene co-founder John Enwere warns that long-term care insurance typically does not outright cover housing costs like room-and-board in assisted living or memory care facilities.
"Premiums are high and volatile," Enwere told NTD. "I have personally seen clients' premiums spike in their 70s, forcing them to lapse coverage when they needed it most and claims typically prove to be a hassle. Well-funded families have been denied coverage for vague and unreasonable technicalities."