When savings and monthly income don’t stretch far enough for home care, families often look at assets they hadn’t thought of as care funding: life insurance policies, annuities, and home equity. Using life insurance to pay for home care, or tapping other assets, can help bridge the gap, but each option has trade-offs worth understanding.
Quick answer: Some life insurance policies can help pay for home care through accelerated death benefits, long-term care riders, policy loans or withdrawals, surrender, or a life settlement. Annuities and reverse mortgages can also turn assets into income for care. Each affects heirs, taxes, and benefit eligibility differently, so get professional advice first.
Using Life Insurance to Pay for Home Care
Accelerated Death Benefits
Many policies let the insured access part of the death benefit early if they’re chronically or terminally ill. The amount paid early reduces what beneficiaries receive later.
Long-Term Care or Chronic Illness Riders
Some policies include riders that pay a monthly benefit for long-term care, including home care, when the insured meets eligibility requirements. Check the policy or call the insurer.
Cash Value Loans or Withdrawals
Permanent policies, like whole or universal life, build cash value that may be borrowed or withdrawn. Unpaid loans reduce the death benefit, and some withdrawals may be taxable.
Surrendering the Policy
Canceling a permanent policy returns the cash surrender value, but ends coverage and may create taxable income.
Life Settlements
Some policyholders sell their policy to a third party for more than the cash surrender value but less than the death benefit. Settlements can be complex and costly, so get independent advice.
Annuities
Some families use annuities to create a steady income stream for care. Certain annuities are designed with long-term care features. Annuities can have surrender charges and complex terms, and some may be used in Medicaid planning, but rules are strict. An elder law attorney or fee-only financial advisor can help.
Reverse Mortgages
A reverse mortgage lets homeowners 62 and older turn part of their home equity into cash without monthly mortgage payments. The loan is typically repaid when the homeowner moves out permanently, sells, or passes away. Considerations:
- The homeowner must continue paying property taxes, insurance, and maintenance.
- Fees and interest reduce home equity over time.
- If the homeowner moves into a care facility long-term, the loan may become due.
- It works best for people who plan to stay at home, which aligns with aging in place.
HUD-approved counseling is required for federally insured reverse mortgages.
Questions to Ask Before Using These Assets
- How much care is needed, and for how long? See how many hours of home care.
- How will this affect heirs and beneficiaries?
- What are the tax consequences?
- Could this affect Medicaid or other benefit eligibility?
- Are there fees, penalties, or surrender charges?
- Are other options, like long-term care insurance or VA benefits, available first?
Building the Full Picture
These tools work best as part of a larger plan that may include savings, family contributions, insurance, and public benefits. Our pillar guide on how to pay for home care lays out all the options, and using long-term care insurance covers another common resource.
Frequently Asked Questions
Can term life insurance pay for home care?
Term policies don’t build cash value, but some include accelerated benefit riders for serious illness. Check the policy.
Is a reverse mortgage a good way to pay for home care?
It can be for homeowners who plan to stay home long-term and understand the costs. Get independent advice and required counseling.
How Briggs Home Care Can Help
Your local Briggs Home Care team can share clear pricing and help you estimate care needs so you and your advisors can plan with confidence. Explore our services, find a location near you, or call 1-833-960-CARE (2273).
This article is general information, not financial, tax, insurance, or legal advice.
Related Reading
- Start here: How to Pay for Home Care: A Complete Guide to Your Options
- Splitting the Cost of a Parent’s Care Among Siblings
- Medicare Advantage In-Home Support Benefits: What to Check Before You Enroll
Trusted outside resource: Medicare.gov
