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The definitions below define four components common to all long-term care insurance
policies. Each of these must be chosen by the potential policyholder in order to design a
long term care insurance policy.
Daily Benefit
The daily benefit is the amount of money that the insurance company will pay
for your care on a daily basis if you need long-term care. How do you know
how much long-term care costs in your area? It is recommended to base your
daily benefit on the cost of a semi-private nursing home room or a private
nursing home room depending on your preference. Even though you may stay
at home or in assisted living, nursing care is the most expensive, and it is
wise to insure for the most expensive scenario. Click here to find out the cost
of care in your area.
Benefit Period
The benefit period is a multiplier that the insurance company uses to calculate
the total amount of money in your policy upon approval. For example, if your
daily benefit is $200.00 per day and you have a three year benefit period, the
total amount of money available for your long-term care is $219,000 the day
you receive your policy(before any growth from inflation protection). By taking
$200.00 and multiplying it by the number of days in three years, you come up
with $200.00 * 1095 days = $219,000. Remember, the benefit period is not a
time limit on your benefits. It is just a number used to calculate the total
dollars in your policy.
Elimination Period
The elimination period is in essence your deductible or waiting period. When
you need to use your long-term care policy, you must pay out-of-pocket for your
care for the entire elimination period. A 90 day elimination period would mean
that you have 90 days of out-of-pocket expenses. On the 91st day, your
benefits would begin.
Inflation Protection
Inflation protection is a critical component of long-term care insurance. It
increases your benefits every year by a specified percentage while your
premiums stay level(depending on the particular company's history of raising
or not raising premiums).
You can choose inflation protection that compounds annually or does not
compound at all. Most states recommend people under the age of 70
purchase 5% compound inflation protection. This doubles your daily benefit
and the overall dollar amount of your policy every 14.3 years. Over the age of
70, there is 5% simple inflation protection which is simply non-compounding
inflation protection. This will double your daily benefit and overall dollar
amount of your policy every 20 years.
Every company sends an annual statement to the policyholder showing how
much their benefits have increased from their inflation protection. Keep in
mind, the cost of long-term care has been rising at approximately 5% to 6%
compounded annually.
policies. Each of these must be chosen by the potential policyholder in order to design a
long term care insurance policy.
Daily Benefit
The daily benefit is the amount of money that the insurance company will pay
for your care on a daily basis if you need long-term care. How do you know
how much long-term care costs in your area? It is recommended to base your
daily benefit on the cost of a semi-private nursing home room or a private
nursing home room depending on your preference. Even though you may stay
at home or in assisted living, nursing care is the most expensive, and it is
wise to insure for the most expensive scenario. Click here to find out the cost
of care in your area.
Benefit Period
The benefit period is a multiplier that the insurance company uses to calculate
the total amount of money in your policy upon approval. For example, if your
daily benefit is $200.00 per day and you have a three year benefit period, the
total amount of money available for your long-term care is $219,000 the day
you receive your policy(before any growth from inflation protection). By taking
$200.00 and multiplying it by the number of days in three years, you come up
with $200.00 * 1095 days = $219,000. Remember, the benefit period is not a
time limit on your benefits. It is just a number used to calculate the total
dollars in your policy.
Elimination Period
The elimination period is in essence your deductible or waiting period. When
you need to use your long-term care policy, you must pay out-of-pocket for your
care for the entire elimination period. A 90 day elimination period would mean
that you have 90 days of out-of-pocket expenses. On the 91st day, your
benefits would begin.
Inflation Protection
Inflation protection is a critical component of long-term care insurance. It
increases your benefits every year by a specified percentage while your
premiums stay level(depending on the particular company's history of raising
or not raising premiums).
You can choose inflation protection that compounds annually or does not
compound at all. Most states recommend people under the age of 70
purchase 5% compound inflation protection. This doubles your daily benefit
and the overall dollar amount of your policy every 14.3 years. Over the age of
70, there is 5% simple inflation protection which is simply non-compounding
inflation protection. This will double your daily benefit and overall dollar
amount of your policy every 20 years.
Every company sends an annual statement to the policyholder showing how
much their benefits have increased from their inflation protection. Keep in
mind, the cost of long-term care has been rising at approximately 5% to 6%
compounded annually.