8 payment options with eligibility, coverage, and pros/cons
Assisted living costs between $3,000 and $7,000 per month depending on your state, the level of care needed, and the community you choose. If you're helping a parent or loved one figure out how to cover those costs, you're far from alone. Most families don't have a single, clear-cut funding source -- they piece together a combination of options to make it work.
The good news is that there are more ways to pay for assisted living than most people realize. Some are well-known, like long-term care insurance. Others, like VA Aid and Attendance or life insurance conversions, fly under the radar completely. This guide walks through all eight major options -- who qualifies, how much each one covers, and the trade-offs involved.
One important note before we get started: every family's financial situation is different. This guide gives you the landscape, but for personalized guidance on your specific situation, it's worth consulting with an elder law attorney or financial advisor who specializes in senior care planning.
Private pay is the most common way families cover assisted living. According to Genworth's Cost of Care Survey, the majority of assisted living residents pay out of pocket, at least initially. This includes personal savings, retirement accounts, Social Security income, pension payments, and other personal funds.
The math is straightforward but sobering. The national median cost of assisted living runs about $4,500 to $5,000 per month, which works out to roughly $54,000 to $60,000 per year. The average assisted living stay is about 2.5 years, meaning a family should plan for approximately $135,000 to $150,000 in total costs -- though stays of 4 to 5 years are not uncommon.
For many families, private pay is the starting point while they explore other options. Some use savings to cover costs during a Medicaid application or while waiting for a waiver slot to open. Others combine private pay with one or more of the options below to reduce the monthly out-of-pocket burden.
Long-term care (LTC) insurance is specifically designed to cover costs that health insurance and Medicare don't -- including assisted living, memory care, and in-home care. If your parent purchased a policy years ago, it may be one of the most valuable financial assets they have right now.
A typical LTC policy pays a daily or monthly benefit toward care costs. Common benefit amounts range from $100 to $300 per day ($3,000-$9,000/month), with a benefit period of 2 to 5 years. Most policies have an elimination period (similar to a deductible) of 30 to 90 days where the family pays out of pocket before benefits kick in.
If your parent has an LTC policy, contact the insurance company as soon as possible to understand the claims process. Many families wait too long and miss out on benefits they've been paying into for decades.
Medicaid is the single largest payer of long-term care in the United States, but there's a common misconception that Medicaid only covers nursing homes. In reality, approximately 45 states now offer Medicaid Home and Community-Based Services (HCBS) waivers that can help cover the cost of assisted living.
These waivers allow Medicaid funds to pay for care in community settings -- including assisted living facilities -- rather than institutional nursing homes. The idea is simple: community-based care is usually less expensive and preferred by seniors, so states save money while giving people more choices.
Medicaid is a means-tested program, which means your parent must meet both income and asset limits to qualify. These vary by state, but general guidelines are:
The biggest drawback of Medicaid HCBS waivers is the waitlist. Because states have limited waiver slots, many maintain waitlists that can range from several months to 3 or more years. Some states, like Florida and Georgia, have particularly long waits. Others, like Oregon and Washington, have more robust waiver programs with shorter waits.
If you think your parent may eventually need Medicaid to help pay for care, apply as early as possible. Getting on the waitlist costs nothing and keeps your options open.
Medicaid rules are complex and vary significantly by state. An elder law attorney can help navigate the application process and protect assets where legally possible.
Compare all senior care options side-by-side for your state.
Calculate Your Costs →The VA Aid and Attendance benefit is one of the most underused programs for paying for senior care. It provides a monthly pension supplement to wartime veterans and their surviving spouses who need assistance with daily activities -- and it can be used to pay for assisted living.
| Beneficiary | Maximum Monthly Benefit | Annual Benefit |
|---|---|---|
| Veteran | Up to $2,431 | $29,172 |
| Veteran with spouse | Up to $2,876 | $34,512 |
| Surviving spouse | Up to $1,318 | $15,816 |
The application process can take 3 to 6 months or longer, so apply early. Many families work with a VA-accredited claims agent or attorney to navigate the process. Be cautious of companies that charge large upfront fees for "pension poaching" -- legitimate VA-accredited agents typically do not charge for filing claims.
Even if Aid and Attendance doesn't cover the full cost of assisted living, $2,431 per month can offset a significant portion of the bill when combined with Social Security and other income.
If your parent owns a life insurance policy -- particularly a whole life or universal life policy with cash value -- there are several ways to convert that asset into funds for assisted living. Many families don't realize that a life insurance policy can be a source of income while the insured is still alive.
Whole life and universal life policies accumulate cash value over time. Your parent can withdraw from or borrow against this cash value to pay for care. Loans from the policy are typically tax-free, though they reduce the death benefit. This is often the simplest approach if the cash value is substantial.
Many life insurance policies include an accelerated death benefit (ADB) rider, sometimes called a "living benefit." This allows the policyholder to receive a portion of the death benefit early -- typically 25% to 100% -- if they are diagnosed with a terminal, chronic, or critical illness. Since many assisted living residents qualify under the chronic illness definition (needing help with 2+ ADLs), this rider may apply. Check the policy or call the insurer to find out.
A life settlement involves selling the life insurance policy to a third-party investor for a lump sum. The payout is typically 20% to 40% of the death benefit -- less than the full benefit, but more than the cash surrender value. For example, a $200,000 policy might sell for $40,000 to $80,000.
Life settlements make the most sense when the policyholder no longer needs or can afford the premiums, and the proceeds are needed for care. There are tax implications, so consult a financial advisor before proceeding.
Some newer life insurance policies include a long-term care rider that allows the death benefit to be used for qualified long-term care expenses. If your parent's policy has this rider, it effectively functions like long-term care insurance built into the life insurance policy.
For seniors who own their home, a reverse mortgage can unlock home equity to help pay for assisted living. The most common type is the Home Equity Conversion Mortgage (HECM), which is insured by the Federal Housing Administration.
A reverse mortgage allows homeowners aged 62 or older to borrow against their home's equity without making monthly mortgage payments. The loan is repaid when the borrower permanently leaves the home -- which, in the case of assisted living, would be when the home is sold.
Proceeds can be taken as a lump sum, a monthly payment, a line of credit, or a combination. The amount available depends on the borrower's age, the home's value, and current interest rates. A homeowner in their late 70s with a paid-off home worth $300,000 might qualify for $150,000 to $180,000 in proceeds.
A reverse mortgage works best as a bridge strategy -- converting home equity into care funding while the family makes longer-term plans, such as selling the home or qualifying for Medicaid.
Sometimes families need to cover assisted living costs for a defined period while waiting for another funding source to come through. This is where bridge financing comes in.
| Option | Typical Terms | Best For |
|---|---|---|
| HELOC | Variable rate, revolving | Homeowners with equity |
| Bridge loan | 6-12 months, higher rate | Waiting on home sale |
| Personal loan | Fixed rate, 1-5 years | Smaller amounts needed |
| Family loan | Flexible terms | Families with means |
| Community payment plan | Varies by facility | Short-term gaps |
Many assisted living communities are accustomed to families in transition and may offer flexible payment arrangements during the first few months. It never hurts to ask the community's admissions team about their policies for families waiting on Medicaid, VA benefits, or a home sale.
When no single funding source covers the full cost, many families split the expense among adult children, siblings, and other relatives. This is more common than people think, and when done thoughtfully, it can be a sustainable long-term approach.
Family cost-sharing arrangements work best when they're formalized early, before stress and resentment build up. Here are some practical tips:
If siblings disagree about care decisions or financial contributions, a geriatric care manager or family mediator can help facilitate productive conversations. These professionals are experienced in exactly these dynamics and can save families from lasting rifts.
Compare all senior care options side-by-side for your state.
Calculate Your Costs →| Option | Who Qualifies | Monthly Coverage | Pros | Cons |
|---|---|---|---|---|
| Private Pay | Anyone with savings | Varies | No restrictions, immediate | Depletes savings quickly |
| LTC Insurance | Policyholders only | $3,000 - $9,000 | Designed for this purpose | Must buy before needing it |
| Medicaid Waivers | Low income/assets | Varies by state | Can cover full cost | Waitlists of 1-3+ years |
| VA Aid & Attendance | Wartime vets/spouses | Up to $2,431 | Tax-free, no repayment | 3-6 month application |
| Life Insurance | Policy owners | Lump sum | Unlocks unused asset | Reduces death benefit |
| Reverse Mortgage | Homeowners 62+ | Varies by equity | No monthly payments | High fees, reduces estate |
| Bridge Loans | Creditworthy borrowers | Short-term | Covers gaps quickly | Interest costs, repayment |
| Family Sharing | Families willing to split | Varies | Flexible, no interest | Can strain relationships |
With eight different options, choosing the right path depends on your parent's financial situation, health status, and timeline. Here's a simplified decision framework to help you narrow things down:
If they have long-term care insurance -- file a claim immediately. This is exactly what the policy is for. Contact the insurance company and start the process, even if your parent doesn't need assisted living just yet. Understanding the benefits and elimination period gives you time to plan.
If they are a wartime veteran or surviving spouse -- apply for VA Aid and Attendance right away. Even if your parent has other resources, $2,431 per month in tax-free income makes a significant dent in the bill. Use private pay or a bridge option to cover costs while the application is processed.
If they own a home -- evaluate whether selling the home, taking a reverse mortgage, or using a HELOC makes sense. For many families, the home is the largest financial asset, and unlocking that equity is key to funding care. Consider whether a family member might move into the home, whether the market is favorable for a sale, and whether your parent is emotionally ready to let go of the house.
If they have limited income and assets -- explore Medicaid HCBS waivers in your state. Get on the waitlist as early as possible, even if you're not sure your parent will need Medicaid. The waitlist can be years long, and being on it costs nothing.
If they have a life insurance policy -- review the policy for cash value, accelerated death benefits, and LTC riders. A policy that's no longer needed for its original purpose (protecting a spouse, for example) may be more valuable as a care funding tool.
Most families don't rely on a single funding source. The most common pattern looks like this:
This layered approach gives families flexibility and keeps options open as circumstances change over time.
No. Medicare does not cover assisted living costs. Medicare covers short-term skilled nursing care after a hospital stay (up to 100 days), but it does not pay for long-term custodial care in an assisted living facility. This is one of the most common misconceptions in senior care planning. Medicaid (not Medicare) is the government program that can help pay for assisted living through HCBS waivers, but it has strict income and asset requirements.
The average assisted living stay is approximately 2 to 3 years, though this varies widely. Some residents stay for only a few months before transitioning to a higher level of care, while others live comfortably in assisted living for 5 years or more. When budgeting, it's wise to plan for at least 3 years of costs to avoid being caught short. At $4,500-$5,000 per month, that means planning for approximately $162,000 to $180,000 in total costs.
Possibly. If the primary reason for the assisted living stay is medical care (including assistance with Activities of Daily Living due to a chronic illness), the costs may qualify as a medical expense deduction on your federal taxes. This includes the room, meals, and care services. You can deduct the portion of medical expenses that exceeds 7.5% of your adjusted gross income. If you're paying for a parent's care and claim them as a dependent, you may be able to include those payments on your own return. Consult a tax professional for guidance specific to your situation.
Navigating the financial side of assisted living is rarely straightforward, but understanding your options is the most important first step. Most families find a way to make it work by combining two or three of the approaches above. Start early, ask questions, and don't be afraid to reach out to professionals -- elder law attorneys, financial advisors, and geriatric care managers deal with these exact situations every day and can help you find the best path forward for your family.