Author: Andrea Miller
Reviewed By: Kristi Bickmann

Assisted living facilities can’t accept life insurance as payment. However, many people cash out their life insurance policies to cover the cost of assisted living care. You have a few options if you’re interested in using insurance to pay for assisted living.

How do you pay for assisted living with life insurance?

You can pay for assisted living with life insurance by cashing out your policy, using accelerated death benefits (if your policy offers this option) or purchasing a product that combines long-term care and life insurance. Selling your policy for its current cash value becomes an option when you reach age 70 as a man or age 74 as a woman. The IRS taxes the total as income. 

If you’re an adult with a terminal illness, you have the option of selling an insurance policy to a third party for cash, known as a viatical settlement. Hybrid life insurance and long-term care policies typically pay a percentage of the death benefit toward assisted living. Some life insurance policies include accelerated death benefits, allowing you to take a tax-free cash advance to pay for assisted living.

How much do you get when you cash out a life insurance policy?

The amount you get when you cash out a life insurance policy depends on the type of policy. If your policy has a life assurance benefit, you get up to 50% of its value to use for long-term care. When you sell the policy to a third party or back to the insurer, you receive 50% to 75% of its value.