How to Choose the Right Insurance for Your Assisted Living Facility

As the demand for care at assisted living facilities grows, operators must be ready to explore insurance options for their facilities. They may need to update existing policies with custom add-ons or acquire a completely new policy. In either case, typical commercial plans may not be enough. Policies specifically designed for the needs of assisted living facilities provide specialized protection in a high-risk industry.

Assisted living facility insurance is not one-size-fits-all. Here, we outline the best practices for choosing policies and add-ons for assisted living facilities with insights on how to sort through the complex range of choices offered by insurance providers in the industry.

Why Do Assisted Living Facilities Need Insurance?

Between 2023 and 2024, claim severity for assisted living facilities (ALFs) increased approximately 3.7%, with a total loss of around $1.87 billion in expenses and indemnities. This increase comes on the heels of several major industry changes, including growth related to an aging population, post-pandemic staffing shortages, and rising injury rates.

Around 1 in 4 adults over the age of 65 suffers a fall every year. These falls cause over 3 million emergency room visits and over 38,000 deaths every year, with healthcare costs predicted to exceed $100 billion by 2030. Though this data is for fall injuries alone, assisted living facilities shoulder a disproportionate cost burden due to their investment in the senior demographic. This risk trickles down to all aspects of their operations, from their residents’ rate of legal claims to their operating costs and insurance liabilities.

Key Takeaway: Assisted living facilities can no longer get by on conventional business insurance. Due to increases in claim severity and frequency, their policies should be customized to the distinct needs of ALF operations.

What Types of Insurance Should Assisted Living Facilities Purchase?

Even if assisted living facility operators know they should buy insurance protection, they may not recognize the exact policies needed to maximize their coverage. Since ALFs have distinct risks, operators should always look for insurance agencies with experience serving businesses in the assisted living industry. Though each policy should be customized to the specific facility, the following insurance types are part of the general structure that successful facilities follow to protect their assets and residents:

General Liability Coverage

This is the fundamental insurance that all businesses have, even with conventional, minimum policies, to protect their assets in case of general events. General liability coverage can compensate for damages such as visitor injuries, property damage, or legal costs. These policies are a high priority to have at a basic level, but they cannot fully protect an ALF from all risks.

Example case: A resident’s family member slips and falls while visiting their loved one. General liability can cover their medical expenses and the costs of potential lawsuits.

Professional Liability Coverage

Professional liability insurance is a more in-depth policy option that covers some of the distinct risks faced by assisted living facility operators, such as malpractice, negligence, and errors or omissions. This coverage can also protect the facility’s leaders from liability in various scenarios.

Note: Directors & Officers (D&O) insurance is a type of professional liability coverage that can offer more in-depth protection for board members or managers, especially in cases of medical or financial mismanagement claims.

Commercial Property Coverage

Assisted living facility insurance often focuses on protection for residents, visitors, and board members due to the industry’s high risk for legal liability, but comprehensive protection also factors in the facility and its assets. Physical damage to the building, property, or business assets should be covered with repair and replacement coverage in a commercial property policy.

Example case: A fire in a facility can damage the structure, which may be covered by basic property insurance, but it can also destroy expensive professional equipment. Without additional add-ons for high-value machines, claims may be underpaid or denied.

Cyber Liability Coverage

Assisted living facilities handle sensitive financial, account, insurance, and medical information. A data breach at a retail store can put payment information at risk, but for an assisted living facility, the liability is far more severe. Residents have transferred their entire identities to the digital storage systems of their facility. These identities are placed at risk every time a hacker or bad actor gains access to the facility’s systems.

Hackers are always looking for ways to steal data from high-value, vulnerable targets like assisted living facilities. Setting up stronger digital protections with automatic security updates and a clear reporting system for incidents can lower the facility’s risk while also lowering its premiums. Part of working with custom insurance providers is gaining the tools to prevent cybersecurity incidents, while also creating a financial safety net to reimburse the facility for reputational and legal damage in the event of a breach.

Custom Insurance Policies Provide Specialized Protection for Modern Facilities

Successful assisted living facility operators are prepared to face the risks of the modern world. This includes establishing a foundation of professional, general, and digital liability protection that is adaptable to their needs in a high-risk industry. At Pro Insurance Group, our team has decades of experience creating custom insurance policies for assisted living facilities to provide not only general business protections but also additional policies and add-ons that their facility needs.

Contact our team and schedule a consultation to learn what should be included in your facility’s policy and how you can prepare for risks in your facility’s operations.