Use Your House: Alternative to Long Term Care Insurance

For most of us, our house is our largest asset. We expect to pass this inheritance along to our children. In some cases, you can keep your house and still have long-term care insurance plan; but more often, you may need to use the real estate equity you’ve accumulated through your lifetime to pay for your very old age.

Hire a Companion

More than one college student has funded their housing by living with and helping care for a homeowner with long-term care needs. Find the right person (or long-term care insurance couples), trade a bedroom and kitchen privileges for help with your meals and your laundry, and look to friends, family, and community resources for other needs. Even if you need help with the instrumental activities of daily living, you may be able to stay in your home for many years.

Reverse Your Mortgage

Many people today have more money tied up in their houses than liquid in their bank accounts. One way to tap into this money but stay in the house is through a reverse mortgage. Think about the mortgage you took to pay for the house originally. You paid the bank monthly, your equity built up, and at the end of 20 or 30 years the house was all yours. A reverse mortgage, as the name implies, works in reverse. The bank is basically buying the house back from you a month at a time. Each month you receive a check. You own your house, are responsible for its upkeep, and pay fees and interest on the loan, and you are guaranteed that you will be able to stay there for your lifetime. After you die, the bank can claim the house, or at least the equity that it has contributed, as payment on the loan.

There is a comforting feeling of independence when one considers these options, since none of us likes to think of being forced to dip into the national kitty to care for us. But it might be wise to warn your heirs that the house they grew up in will return to the bank, or that they’d best not count on using your savings and investment to fund their kids’ private school education or wait for an inherited 401(k) payout to buy a summer place.

Tell them you are following the advice on the bumper sticker and “spending your children’s inheritance.”

Your insurance representative will say, “You don’t self-insure against cancer or against a fire; why are you self-insuring against the potentially ruinous expense of long-term care?” Tell the agent that you believe in the American dream, which values independence above all. Tell your insurance representative that you want to do it all by yourself, and that you can.