Paying for elder care at home

Government programs and healthcare insurance often don’t cover assistance for the elderly, so if you intend to provide care for a loved one, either in their own home or elsewhere, it would be smart to put a strategy in place now, like purchasing long-term care insurance from New York Life Insurance Company or New York Life Insurance and Annuity Corporation.

Understanding options for senior care

As loved ones grow older, the need for a bit of help with everyday chores becomes almost inevitable. But that doesn’t necessarily mean a move to a nursing home is next. For many, full-time medical care isn’t necessary. Maybe all that is needed is an aide for a few hours a day to help with cooking meals and making sure medications are taken at the right time. In cases like this, home care is often the best option. Plus, there are many benefits to staying in your own home if you can remain independent and healthy. It can mean more freedom, familiar surroundings, and contact with friends and the places you’ve grown to love.

Often, the biggest question when you or a loved one reaches this transition will be how to fit it into the family’s budget. The costs of care can be expensive, but proper preparation can help.

Depending on the care needed, there are three main solutions that vary in cost and services provided. They are:

Elder care in the home

The obvious first step when one needs a bit of extra help is home care, either from a home health aide or a registered nurse. The aide or nurse gives one-on-one attention and support, and there is no need to relocate or pay for unneeded care. Whether you go through an agency or hire directly, home care provides flexibility in costs, services, and amount of care, which can be adjusted as needed.

Assisted-living facilities

Assisted living is the next step up from home care. It usually consists of a small residential community that offers various amenities and services to help with everyday life. Typically, you’ll still have your own room, or even a full apartment. And, while nurses are often on-site, there usually isn’t extensive or 24/7 medical care. Many of these facilities provide community recreation and daily events to keep residents active and engaged.

Nursing homes

When an elderly person needs more full-time supervision or help with medical issues, a nursing home is likely to be a better option. Most nursing homes have trained nurses and staff ready to assist around the clock with everything from hygiene to therapy.

Home care costs and how to pay for senior care

Costs will vary widely by state and location. Care near San Francisco can be significantly higher, for example, than care in rural Ohio. If you are not prepared, these costs can have a large impact on your family’s finances. If you do not have long-term care insurance, you’ll need to find a way to manage a new budget scenario, whether it’s by accessing retirement savings, taking out a mortgage on your home, selling assets, or accessing the cash value of an insurance policy.

The national average for a nonmedical professional home health aide is $29.12 per hour. So, if you need 20 hours of care a week, it will cost more than $30,000 per year. If more than 20 hours a week is required or you need an aide who can provide medical assistance, these costs can escalate quickly. The average cost of a private room in a nursing home is more than $116,000 per year.¹ For many, these costs can be prohibitive.

Related: Calculate your long-term care costs

Government programs like Medicare or Medicaid

Many are surprised to learn that Medicare does not cover long-term care. You’ll still use it to cover hospital care, doctor services, medical supplies, and prescription drugs, but services related to everyday activities are excluded. Medicaid, a public assistance program for low-income families and individuals that is funded by both the state and the federal government, does cover some services if you meet your state’s eligibility requirements. Federal guidelines are loose, so there can be significant differences in eligibility requirements from state to state, but individuals are often required to have an income of less than $2,829 and assets of less than $2,000 (not counting their primary residence).² For these reasons, many do not qualify.

Related: Does Medicare or Medicaid cover assisted living?

Paying out of pocket

Many families self-fund long-term care. There are several options, with pros and cons, for coming up with the necessary money. Some life insurance policies have ways that you can access the death benefit while you are still living to help pay for long-term care, but this lowers the eventual death benefit. If the family member has retirement savings, turning that into a guaranteed income stream with an immediate annuity might be an option.* Some who own their homes outright might consider using that equity or taking out a reverse mortgage, but that often means the property will not be inherited by family members. Another common option is to have an elderly parent move in with an adult child, but this can put a large burden on the person who takes on that responsibility. At the end of the day, what is right for your family will be different from what is right for your neighbor’s family.

Long-term care insurance

Similar to life insurance or disability insurance, long-term care insurance can be purchased to guard against the costs of necessary daily care, whether it’s at home, in an assisted-living facility, or in a nursing home. There are many different types of policies and options you can put into place. Long-term care benefits can even be combined with life insurance in some policies.

How long-term care insurance can help

Most of us save a bit throughout our working lives in order to have a comfortable retirement. But preparing a budget for your retirement isn’t easy. When unexpected expenses occur, you may need to make significant adjustments. People who are 65 today have a 70% chance that they will need some help with everyday activities at some point in the future.³ If you’re properly insured, however, you can mitigate much of the cost associated with this care.

Traditional vs. combination long-term care insurance

Traditional long-term care policies cover in-home and facility care, or sometimes care by certified family members. They provide coverage that focuses on long-term care and are usually best for families that already have life insurance and retirement savings.

If you need more versatile coverage, you can combine long-term care and life insurance into one package. You pay premiums for a defined period, and in return you get a long-term care benefit if you need it—or a death benefit for your loved ones if you don’t. Your policy may even come with return-of-premium options,** so you can get your premium back in the future if you discover that you need it for something else.

When is the best time to start thinking about long-term care insurance?

As with most insurance, age and health matter when determining rates and eligibility. It’s often advisable to explore options and begin preparing when you are in your 40s and 50s, while you are still healthy. That said, it’s never too soon (or too late) to discuss your options.

RELATED CONTENT

¹“Cost of Care Survey,” New York Life, 2023.

²“Medicaid Eligibility, 2024 Income, Asset & Care Requirements for Nursing Homes & Long-Term Care,” American Council on Aging, January 29, 2024.

³“How Much Care Will You Need?,” LongTermCare.gov, 2020.

*Guarantees are based upon the claims-paying ability of the issuer

**Available as long as no policy loans or partial surrenders have been made, no benefits have been used toward long-term care, and all planned premiums have been paid.  Cash surrender value is equal to the greater of the cash value minus any applicable surrender charge, the guaranteed cash value, or the return of premium amount.

The purpose of this material is solicitation of individual insurance. An insurance agent may contact you. Policy forms ICC14-LTC6, LTC6, LTC6-U, ICC18-LTCD PLCY (0218), LTCD PLCY (0218), LTCD-U PLCY (0218), LTC6 (NY), LTCD PLCY (NY) (0218), and any state-specifics, are issued by New York Life Insurance Company, New York, NY. Policy forms ICC20-AF-MP, ICC20-AF-SP, AF-MP, AF-SP, AF-SP-NY, and AF-MP-NY, and any state-specifics, are issued by New York Life Insurance and Annuity Corporation, Newark, DE, a wholly owned subsidiary of New York Life Insurance Company, New York, NY. These policies have exclusions and limitations. The amount of benefits and premium depend on the product options selected. Underwriting approval is required to purchase coverage and a medical exam may be required. Premiums vary by issue age. The company reserves the right to increase premiums in the future on policy forms ICC14-LTC6, LTC6, LTC6-U, ICC18-LTCD PLCY (0218), LTCD PLCY (0218), and LTCD-U PLCY (0218), LTC6 (NY), and LTCD PLCY (NY) (0218). For costs and complete details of the coverage, contact your agent, or the company. New York Life Insurance Company and New York Life Insurance and Annuity Corporation each have sole financial responsibility for their own products.

This material may not provide complete details regarding all features and benefits offered by an NYL Secure Care, NYL My Care, or Asset Flex policy. In all cases, actual policy language will govern the administration of the contract. Benefits may vary by state. Check with your agent for specifics.

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