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How to Pay for Assisted Living

Written by Chloe Clark
 about the author
12 minute readLast updated March 30, 2023
Reviewed by Lucinda OrtigaoLucinda Ortigao is President of Cape Investment Consulting Inc. and is a certified financial planner.

There is no timeline for age-related decline or worsening health issues for aging loved ones. Injuries or illness that impact their ability to go about their daily lives can feel like they come out of nowhere, leading to a lot of stress as you work to ensure they get the care they need without disrupting their comfort and stability. Assisted living facilities, which offer a combination of independence and dedicated care, are often a perfect solution. However, understanding how to pay for assisted living facilities can be complicated.

Key Takeaways

  1. Private funds, home equity, and some insurance policies can be used to pay for assisted living. Understanding the scope of your loved one’s financial situation is essential to know what can be covered.
  2. Veterans and low-income seniors may be eligible for financial assistance. Both the VA and Medicaid offer coverage depending on a few key qualifying factors.
  3. Factors such as location and suite style can lower your parent’s monthly costs. It may take some time and research to find the right living situation at a price your parent can afford.
  4. Help is available to find the right solution for your loved one. Financial advisors and senior living experts can help you navigate all options.

Assisted living payment options

The median annual cost of assisted living in 2021 was $54,000, according to a yearly survey conducted by Genworth. This cost was up 4.65% compared to the cost in 2020. With these costs rising every year, it’s essential to have a plan to pay for care. A few options that may be available include insurance coverage, Medicaid, and veterans benefits. While not every option will apply to your loved one’s situation, there’s likely some overlap in types of financial resourcesthey can use to cover care costs.

Private funds

The majority of families use some form of private funds to cover a portion (or, in some cases, all) of their assisted living costs. Private funds can include savings accounts, Social Security payments, pensions, and retirement funds. With preplanning and saving, it can be possible to cover a majority of the cost. It may also be helpful to understand how tax deductions can apply to assisted living costs.  Talking to a financial advisor alongside your parents can be a helpful way to assess where they stand in terms of private funds available and to plan for the future.

Long-term care insurance

If your loved one already has a long-term care insurance policy, it will likely cover some aspects of assisted living. You should review the policy with your loved one’s insurance agent to see what is currently covered, what may be excluded, and what the limits to payouts are. There may be additional stipulations to whether assisted living facilities are covered, such as how many activities of daily living (ADLs) your loved one can perform on their own. In some cases, the insurance company may require that your loved one receives a physical evaluation or an exam for cognitive impairment to determine their eligibility.
Some insurance companies may issue a “facility-only” policy. This means that coverage will only be provided if your loved one is at a licensed assisted living facility or nursing home, and that the policy will not cover an unlicensed facility or in-home care.

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Life insurance

With some life insurance policies, you may be able to withdraw some or all of the cash value of the policy or to borrow against the insurance policy to pay for assisted living expenses. These payments will typically be made directly from the insurance provider to the care facility itself. Your loved one’s insurance agent will be able to outline what’s available from your parent’s policy to pay for their care.
Additionally, some caution is advised when taking cash value from a life insurance policy. The money may be taxable, meaning that a large tax bill may result when you file your loved one’s taxes. It will also mean that less money is left to cover funeral expenses or pass on to surviving family. Consult a tax professional for more details.


Medicare may cover short-term stays in a skilled nursing facility if certain criteria are met, but it doesn’t cover rent, personal care, or meals in assisted living. However, Medicare will continue to cover the cost of your loved one’s prescriptions and medical appointments, regardless of where they live.


Medicaid helps seniors with low income and limited assets cover some aspects and services associated with assisted living care; these can include transportation and personal care assistance. Some states even provide supplemental coverage in the form of funds for room and board at an assisted living facility. Additionally, most states offer something called Home- and Community-Based Services (HCBS) Medicaid waivers. These waivers allow recipients to live in the setting of their choice, including assisted living, while still receiving Medicaid services.[01] However, the restrictions around this vary greatly state by state. Contacting the Medicaid office in your loved one’s state can help you more fully understand whether they qualify for Medicaid and what types of Medicaid coverage and services are available.

VA Aid and Attendance Pension

Honorably discharged veterans who served at least one active-duty day during wartime (although not necessarily in combat) and at least 90 active-duty days total, may qualify for the Department of Veterans Affairs (VA) Aid and Attendance Pension. Surviving spouses of such veterans may also qualify.

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Eligibility rules also require:
  • A physician’s statement that one needs help with at least one activity of daily living
  • One’s net worth doesn’t exceed limits set by Congress
The pension amount a veteran can receive depends on the level of care needed, their annual income, and whether they are married or have any dependents. For example, a veteran with no dependents can receive up to $2,229 a month.[04] Money is sent to the veteran (or their surviving spouse) and can be spent as they see fit, including on the costs associated with assisted living.

Bridge loans

Bridge loans are sums of money supplied by a lender to cover a cost until payment can be secured. This option can be used when an aging loved one plans to sell their house but needs the money to fund their care before the sale occurs. The lender covers the intervening period of time and then is repaid when the house is actually sold.
However, bridge loans are not an option for every homeowner and usually have terms that range from six months to one year.[05] Since the 2008 mortgage crisis, lenders are extremely selective about writing bridge loans and typically only extend them to high-net-worth buyers with excellent credit.

Reverse mortgages

If only one of your parents needs assisted living care, a reverse mortgage might help cover costs. A Reverse mortgage frees up equity while allowing a spouse to remain in the home. The loan proceeds aren’t taxable, which helps the money go further. In most cases, your parents’ home will be sold to pay off the loan after they pass away. However, if heirs are able to pay back the loan, they can keep the home. Note that, if the parent who remains in the home has to move out for an extended period of time, because of illness, work, or any other reason, the loan becomes due and must be repaid. [06]

How to reduce assisted living costs

One factor to consider when it comes to cost is where your loved one lives. Some areas typically have much higher costs of assisted living facilities, which means their funds and benefits may not cover as much. Benefits offered may vary by state, too.
If your loved one lives in a high-cost area, consider the benefits of moving to a more affordable place, especially if it brings them closer to friends and family. For example, according to Genworth, the annual median cost of assisted living in Texas in 2021 was $47,970, whereas in New York it was $54,960.[02] If your loved one does not want to, or cannot, move a considerable distance, it can also lower costs to look for assisted living communities outside of city centers.
After you’ve determined the right area for your parent to live, research options available to lower costs at the facility itself. Some facilities are considered all-inclusive, which means that the monthly payment covers the cost of any service that the facility may offer. Others are a la carte, which means a resident can choose only the services they need. If your parent only has a few dedicated needs, this may be the better financial option.
Additionally, the size and location of their apartment, as well as if they wish to live with a roommate, can also influence monthly costs. Consider your loved one’s comfort level as you discuss these options with them.
Finding the right assisted living facility for your parent or loved one can be a time-consuming task. Between understanding the costs and ways to pay, to ensuring that the facility is one they will be comfortable at, there are many questions to consider. A Senior Care Advisor can connect you with a facility in your area, help you navigate payment options, and provide one-on-one guidance about budgeting for your loved one’s care needs.


  1. American Council on Aging. (2023, March 8). How Medicaid can help seniors lower the cost of assisted living.

  2. Genworth Financial. (2022, June 2). Cost of Care Survey.

  3. Veterans Affairs. (2022, October 12). VA Aid and Attendance benefits and Housebound allowance.

  4. Caginalp, R. (2022, October 24). Bridge Loans: What are they and how do they work? Bankrate.

  5. Consumer Financial Protection Bureau. (2022, July 11). What is a reverse mortgage?

Meet the Author
Chloe Clark

Chloe Clark is a copywriter for OurParents. She has an MFA in Creative Writing, with a background in education and publishing. She has over a decade’s experience in writing for print publications and websites.

Reviewed byLucinda Ortigao

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