Off Duty

Life insurance can pay for nursing home, in-home care

If you're healthy, it may be hard to imagine having a chronic illness or disability that requires you to have constant care in your home or a long-term care facility.

But if you're diagnosed with Alzheimer's disease, how will you or your family pay for it? Do you have enough savings and investments? Should you buy long-term care insurance, for example, through the Federal Long Term Care Insurance Program? Would you or your family have to go into debt to pay for the care?

According to the Federal Long Term Care Insurance website, home care is generally more affordable than skilled nursing care, but it's still expensive. The average nationwide cost of six hours of care by a home health aide, five days a week, is almost $30,000 a year. It's a lot more expensive if round-the-clock care is needed. And for nursing home care, the national average cost is about $83,000 a year. The costs vary widely by region.

There is another option that is gaining interest: long-term care settlement options as part of life insurance policies.

"Life insurance is a great way to provide for your heirs and can help cover long-term care costs," said Mike Meese, a retired Army brigadier general who is chief operating officer of the American Armed Forces Mutual Aid Association.

The advantage of the long-term care option in a life insurance policy is that if you don't use it, your beneficiaries get it as a payment when you die, he said. With policies that are exclusively for long-term care, if you don't use it, you've paid the premiums but don't get the money.

Usually, people are in a long-term care situation for two to 2.5 years, Meese said.

AAFMAA offers these options in all the permanent life insurance policies it sells, at no additional cost. If the long-term care option is needed, the nonprofit organization pays 2 percent of the policy over 50 months. So if the policy is for $100,000 of life insurance, that would be $2,000 a month for long-term care. That, and military retirement, might be enough to cover your costs, depending on the care you need and the cost of care in your area. The Internal Revenue Service also allows you to use life insurance money for long-term care tax-free, up to certain limits.

Navy Mutual also automatically includes this option in its permanent life insurance policy, said Jack McVeigh, a retired Navy commander who is vice president of membership for the nonprofit organization.

Permanent life insurance is more expensive than term life insurance, but it lasts forever, he said. Thus, many people use a mix of term life insurance and permanent life insurance, using term life insurance in times when they need it most to cover expenses in the event of their death. An additional policy that is a permanent policy could be used for final expenses and possible long-term care in later years, he said.

"As people's life expectancies get longer, there's a greater probability they'll have to use long-term care," McVeigh said. This option allows them to keep their freedom and may alleviate some of the worry that they'll be a financial burden on their family if they need long-term care, he said.

To determine the best option for your situation, first get an idea of how much long-term care costs in the area where you plan to retire. Use the tool on the Federal Long Term Care Insurance Program website to find the cost in your area,

Would you have enough retirement income, as well as savings and investments, to cover those costs, realizing also that costs will rise?

Compare the costs of various long-term care insurance programs, which will depend on factors such as your age, the kind of plan and features you choose, as well as your geographic area. The federal site can also help you with that, with the "benefits and features comparison worksheet." Check with some private insurers as well.

If you're thinking of paying for long-term care in a different way — with a permanent life insurance policy — look at the cost of monthly long-term care and estimate how much would be needed over a certain period, such as two years. Do some research and comparisons into companies and other organizations that sell life insurance with those options. AAFMAA and Navy Mutual both automatically include the coverage, but other companies may require you to purchase a separate rider (addition to your policy).

Check for any limitations; make sure the policy spells out in writing how you could gain access to the accelerated life insurance benefits for the purpose of long-term care, that it covers different types from in-home care to nursing homes. Make sure the terms of payment, such as the period of time when you'll receive payments for care, are outlined and acceptable.

Karen Jowers covers military families, quality of life, and consumer issues for Military Times. She can be reached at

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