How do Long Term Care Policies work?

The Design of a policy – the five components

Daily maximum benefit:

For each day on claim for Long Term care, a policy will pay a specified daily amount following the waiting period.  These amounts usually range from a minimum amount of $50.00 – $400 per day.

Benefit Period:

The benefit period is the length of time you would like benefits to be paid.  Most carriers will a benefit period that ranges from 2 years, 3 years, 5 years, or seven years.  The policy lifetime maximum or “benefit pool” is the facility services maximum daily benefit multiplied by the benefit period you select.  This will represent the total policy value, “pool” of benefit dollars. Let’s look at an example.  You chose a Daily Maximum Benefit $300 per day with a five-year benefit period.  $300 multiplied by a five-year benefit period would equal $547,500 (5 years’ x 365 days’ x $300).

Home and community-based care

Some insurers offer a feature in the policy which allows for home care of care in a community environment.  This benefit is usually expressed as a percentage of your daily benefit.  Here is an example: A 50% daily benefit amount for home and community-based care on a $200 maximum daily benefit would equal $100 per day.  You can choose from 50%, 80%, and 100% of your daily benefit.

Waiting Periods:

We all know what deductibles are in insurance.  Think of the waiting period as a deductible.  The waiting period is the number of days of covered and paid services you must receive before benefits will become payable.  Most insurers have a waiting period of 90, 180, 0r 365 days.

Inflation protection

What in the world is inflation protection?  It is a tool that helps a policy retain or even grow in value over time.  It is designed to keep pace with the cost of care.  This feature is usually available at an extra cost, but can be well worth it depending on what inflation does from the time the policy is purchased to the time of use.

The level of coverage chosen from each category will have a direct effect on your total policy premium.  Simply select one benefit level from each category and you’ll be on your way to a policy that fits your needs.