What Does Assisted Living Insurance Cover and Exclude?

As assisted living facilities plan their insurance coverage, owners and operators need to recognize what’s covered and what’s excluded in their policy coverage.

Assembling the right types of policies, along with adequate coverage limits, is a good first step, but identifying exclusions is a necessary next step of any modern facility’s insurance planning process. Failing to recognize exclusions in time can put a facility’s property, personnel, and finances at risk.

What You’ll Learn: This article explains the core components of assisted living facility insurance, including:

• The types of insurance that facility operators need to protect their assets
• Common exclusions in insurance policies that operators should know
• How risk management strategies can reduce unnecessary financial exposure

Assisted living facilities operate in a high-risk industry, but by recognizing coverage inclusions and exclusions, operators can make more strategic insurance decisions to protect their operations.

Core Insurance Policy Types for Assisted Living Facilities

Insurance claims for assisted living facilities have been gradually increasing in severity, with operators in 2024 reporting $1.87 billion in expenses and indemnity costs. These costs come as a result of several trends, including the rising risks of fall-related injuries among facility resident populations, which experts predict will exceed $101 billion by 2030.

To manage costs related to resident injuries and other liabilities, facility operators prioritize certain insurance policy types, including:

• General Liability: These policies cover bodily injury and property damage claims resulting from day-to-day facility operations. Examples include visitor injuries or damage to vendor property.
• Professional Liability: This liability refers to care-related errors and omissions or medical malpractice, including medication and monitoring errors, inadequate care planning, and negligence.
• Property Coverage: This refers to the costs of property damage, including the facility buildings, fixtures, equipment, and furniture. Covered events can include fire, theft, vandalism, or storm damage.
• Workers’ Compensation: All businesses are required to provide workers’ compensation for their employees to pay for lost wages, medical costs, and settlement claims if a worker is injured on the job or develops a chronic illness as a result of their work.
• Abuse and Neglect Coverage: For assisted living facilities, abuse and neglect coverage is a more extensive policy related to professional liability, covering the costs of injuries, settlements, and reputational damage resulting from claims of physical, emotional, financial, or sexual abuse, including neglect and exploitation.

These policies form a foundation of protection for facility operators to support their operations and maintain compliance. However, they are not all-encompassing, especially in a high-risk industry.

Common Insurance Exclusions in Assisted Living

These policies cover common risks, but hidden exclusions can prevent claims from going through, resulting in unexpected financial exposure. The most common exclusions that impact claims in the assisted living industry include:

Intentional Acts: Though liability coverage protects assisted living facilities from the costs of unexpected accidents, insurance companies will not cover intentional acts of misconduct. For example, a slip-and-fall injury may not be covered if the facility employee intentionally caused the fall.

The intentional acts exclusion may be invoked by an insurance company, but there must be evidence to prove that the act was intentional and intended to cause an injury. In the case of assisted living facilities, where residents are often in high-risk demographics and may not have complete control over their actions, this can be difficult to prove.

Regulatory Penalties: Assisted living facilities operate under a high level of regulatory scrutiny. Many regulations can lead to citations of misconduct for the facility, especially if their actions or inactions pose a danger to residents. In the presence of these citations, the facility may have its insurance claims reduced or denied.

Recent claims resulted in “immediate jeopardy” citations for 16 long-term care facilities in Illinois, leading to $1.3 million in penalty charges.

Inadequate Staffing: Each state establishes guidelines on minimum staffing requirements per resident at assisted living facilities. Failing to meet these minimums can lead to claims of negligence and subsequent insurance claim denials. In Illinois, the minimum staffing requirement is 2.5 hours of on-staff nursing and personal care per day for intermediate care residents and 3.8 hours of care per day for skilled care residents.

Specialty Service Coverage: Assisted living facilities care for many different types of residents with preexisting conditions, who can require experimental treatments, whose care can be provided outside the facility, or who have specialized memory care needs. Any of these cases can result in policy exclusions where the insurance company denies coverage based on extenuating circumstances.

Policy endorsements that explicitly extend coverage to these circumstances allow facility operators to make sure they’re covered after an unexpected event. For example, slip-and-fall accidents may not be covered in high-risk memory care units without an additional rider.

Risk Management Strategies Can Help

Facility operators can make sure their coverage applies to their needs by combining these risk management strategies:

• Manage coverage limits based on need. For example, facilities with a dedicated memory care unit likely have a larger risk potential than those without one, requiring additional endorsements to prevent claim denials due to exclusions.
• Customize policies based on claims history and goals. Facilities with a history of high-value claims will likely have a higher risk assessment from their insurance provider. Those with expansion plans should prioritize flexible policies that can be easily extended to new employee groups, locations, and service types.
  
  
• Consult local brokers to guarantee regulatory compliance. Many assisted living facility operators estimate coverage based on services alone, neglecting to account for compliance requirements or exclusions. A local broker experienced with the rules and regulations of your region can help guarantee that your facility is protected to prevent unexpected exclusions from resulting in a claim denial.

Local Insurance Brokers Make Sure You’re Protected

At Pro Insurance Group, our experienced brokers recognize the requirements of assisted living facility coverage in Illinois, including what policies cover, what exclusions commonly impact senior living facilities, and how to prepare with risk management strategies customized to the needs of each facility.

Contact our team to schedule an insurance consultation to create a customized risk management strategy for your senior care facility, including the policy types, coverage limits, and endorsements you need to keep your property, employees, and finances protected.