If you or a loved one is planning to move into a senior living community but wondering how to afford it, a life insurance policy may hold an unexpected solution. Many policies include “living benefits,” which allow you to access funds while you’re still alive. These benefits can help you pay for a senior living community, including assisted living, memory care, or long-term skilled nursing.
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Let’s explore how this works, when it’s an option, and real-life ways families are using life insurance to ease the cost of senior living.
Before tapping into a life insurance policy for senior living , it’s important to understand the type of policy you have.
This offers coverage for a specific period, often 10, 20, or 30 years. If the insured passes away during that time, the policy pays out the full death benefit to their named beneficiaries. Term life generally costs less than whole life. It serves to replace income or provide short-term financial protection. You won’t build any cash value through these policies, so you can’t borrow against or withdraw funds.
Best for:
This lifelong coverage includes a built-in savings component called cash value, which grows over time. You can usually borrow against or withdraw from this cash value after a few years. These policies cost more than term life but offer more flexibility for long-term financial planning.
Best for:
A living benefit is a feature in certain life insurance policies (both term and universal) that allows you to receive a portion of the death benefit while you’re still living. Most often, this option becomes available if a qualifying life event occurs.
This is the most common type of living benefit. It allows you to access a portion (usually between 25% and 95%) of your policy’s death benefit if you’re diagnosed with a terminal, chronic, or critical illness. Your insurer, your policy’s face value, and the state you live in will determine the amount you can access. What remains stays intact for your beneficiaries. You can use the payout in any way you choose, including pay for assisted living or caregiving help.
Consider George, who had a $200,000 life insurance policy. After his doctor diagnosed him with Parkinson’s disease, his family realized he needed help with daily personal care and support. They worried about how to pay for assisted living without selling the house or draining their savings. With his insurer’s approval, George used the accelerated death benefit to access 50% of his policy, receiving $100,000. That money covered 18 months of senior living expenses. And since the remaining 50% of his policy stayed intact, his children still received a $100,000 death benefit after his passing. This option gave George the personal care he needed, without fully sacrificing the legacy he wanted to leave.
Insurance companies require a qualifying event to access a living benefit. You could be eligible if you’re:
In many cases, there’s a waiting period of several months to a year between the time you’re diagnosed and when you can begin accessing the benefit. However, the insurer may reimburse you for expenses paid once they approve your claim.
Using a life insurance benefit while living can be incredibly helpful, but it’s not without consequences. Here’s what to know:
Not always. Some policies include living benefits as a built-in feature. Others require you to purchase an add-on or rider when you buy the policy. In many cases, once your policy is active, you can’t add living benefit riders later, so make sure to ask up front before you purchase a new policy. However, if you have an older policy, don’t assume there’s no living benefit rider. Some insurers have added accelerated death benefit riders to existing policies in recent years, often at no cost. Check with your insurance provider for details.
If you don’t qualify for a living benefit rider or want other ways to fund senior living, consider these alternatives.
If you’ve had a whole life or universal life policy for many years, you’ve probably built up a substantial cash value. You may be able to borrow against or withdraw this money, often tax-free.
These hybrid policies allow you to use benefits for senior living costs and still leave something behind for your family. They’re a good fit for those who want flexibility and can afford higher premiums.
If you’re 70 or older, you may be able to sell your life insurance policy for a lump sum. This option usually makes the most sense for those who no longer need coverage or can’t afford the premiums.
Your term life policy may include a return-of-premium rider, which refunds some or all of your premium payments if you outlive the policy term. These add-ons are usually very costly and only beneficial if you hold the policy to term without cancellation.
Linda, age 78, had paid into her whole life insurance policy for decades. When her arthritis worsened and she began needing more help at home, she and her son started looking into senior living options. The monthly cost of assisted living felt out of reach at first, until her financial advisor reminded her of the cash value built up in her policy. With her insurer’s help, Linda took out a $40,000 policy loan (tax-free) to cover her first year in a senior living community. It gave her the support she needed without tapping into retirement savings or selling her home. And because it was a loan, not a withdrawal, the rest of her policy remained intact, including the death benefit for her family.
Living benefits can be a helpful financial bridge when your senior living needs change quickly. But they’re not right for everyone. Before tapping into your policy, take these steps:
Life Happens is a great resource for more information about life insurance. In addition, they offer a handy locator to find a local provider.
Senior living is an investment in support, connection, and well-being. If you’re wondering how to pay for it, life insurance may offer a unique solution. Whether it’s an accelerated benefit, a cash value loan, or a hybrid policy, these tools can make that investment possible, without putting all the pressure on your savings or your family.
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Disclaimer: Information provided above may vary by community. We encourage you to speak directly with each Senior Living community to confirm specific details and ensure the community is the right fit for your individual needs and preferences.
