Will My Insurance Cover a Retirement Home or Assisted Living?

For baby boomers who are retiring today, this next chapter in life looks a lot different than it did for earlier generations. Boomers are redefining retirement on their own terms, which basically means that anything goes. You may be living the RV life, volunteering, or starting a second act with a whole new career. Whatever retirement looks like for YOU, one common thread that is part of all of our lives these days is the need to continue planning for our future.

Even if you’re healthy and active, you may start to wonder (and even worry) about how you might pay for assisted living if you end up needing extra care later on. Many seniors assume that their health insurance will cover the costs, but more often than not, this isn’t the case.

What Does Medicare Cover?

For most of us, Medicare is our primary source of health insurance in retirement. Original Medicare has two parts:

  • Part A covers inpatient hospital care, hospice care, home health care, and limited coverage in a skilled nursing facility.
  • Part B covers outpatient medical care, like doctor’s visits to diagnose and treat health conditions, along with preventive care.

What this means for you is that you may be able to get some care in a skilled nursing facility if you need it, typically as a result of an injury or illness. The thing to keep in mind is that this coverage requires that you meet specific criteria for medically-necessary care, and it is only available on a short-term basis.

While this short-term coverage of skilled care is beneficial if you need it, Medicare doesn’t actually cover retirement homes or assisted living. Unlike the medical care you would get in a skilled nursing facility, the care that’s provided at assisted living centers is more focused on helping with daily life.

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Medicare Advantage

If you have a Medicare Advantage plan instead of original Medicare (also called Part C), the best thing to do is look into what your individual plan covers. Medicare Advantage plans are required to cover everything that is covered under original Medicare, but many plans also include additional coverage. Until recently, this typically didn’t include assisted living care, but some newer plans are now adding certain long-term care benefits.


Unlike Medicare, Medicaid does help cover the costs of assisted living in addition to the medical expenses of seniors who qualify. Medicaid is a combined federal and state program that is available to low-income individuals, so your eligibility will depend on your monthly income and other financial assets. Because Medicaid is run at the state level, eligibility requirements vary by state. Even if you haven’t qualified for Medicaid before, the income level to qualify in some states is higher if you live in a retirement home or assisted living center.

Another thing to keep in mind is that some people who pay out of pocket for assisted living end up qualifying for Medicaid at some point. This is because many people spend their assets on assisted living, and once those are gone, you may become eligible for Medicaid.

What Other Options Do You Have?

Because you can’t rely on Medicare or Medicaid for assisted living, most people pay for part or all of their nursing home care out of pocket. Paying out of pocket basically means using the financial assets you have, which typically includes savings, retirement accounts, and income from investments like stocks and bonds. Sometimes, an individual or couple will sell their home to pay for assisted living.

Many people worry about how paying out of pocket will affect their lifelong savings. Most of us save up that nest egg not only to cover our expenses in retirement, but also in the hopes of passing something on to the next generation. There are some private financing options available that could help protect your assets, but they aren’t right for everyone.

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Some people purchase long-term care (LTC) insurance as a way to make sure their needs will be met without having to spend their savings and other assets. If you’re wondering if LTC insurance is a good idea for you, the most important factors to consider are your age and income. The younger and healthier you are now, the more affordable a policy will be. In some cases, if you’re older or in poor health, you may not be eligible for coverage at all. You also need to make sure the premiums don’t put too much of a strain on your current budget. Long-term care insurance can be expensive, and it may not be worth the cost if paying for it means dipping too much into your savings.

Final Thoughts on Insurance and Retirement

Another thing to keep in mind is that some policies are more comprehensive than others. Before purchasing long-term care insurance, it’s a good idea to look into the average costs of assisted living care where you live. In 2018, the national median cost of an assisted living facility was $4,000 per month.

There are some alternatives to long-term care insurance, such as activating a rider on a life insurance policy or getting a reverse mortgage. Any of these options can potentially affect your estate, so it’s important to speak with your financial advisor before relying on one of these sources of payment.

The most important thing for today’s retirees to know is that you can’t always rely on insurance to cover nursing home or assisted living costs. This is why it’s smart to research your options now. We spend our careers planning carefully for retirement. Now is the time to plan for what comes next so you aren’t confronted with a difficult decision on down the road.