Long Term Care insurance can be a very complex subject because of all the benefits that go into a policy. Listed below are the descriptions of the core benefits of a policy:
Daily Benefit - This is the amount that the Long Term Care insurance policy will pay per day when you need care. Most policies range from $50 to $300 per day. To determine how long of a Benefit Period you should purchase, it is recommended that you go by the average cost of nursing home care in your state. You can obtain this information by visiting the Genworth Cost of Care Survey 2013.
Benefit Period - This is how long the Long Term Care insurance policy will pay for coverage. Most policies offer a 2, 3, 4, 5, 7, 10, and Lifetime benefit period. Most people purchase a 3 to 5 year benefit period. Studies indicate that the average stay in a nursing home is 2.4 years long, however this does not include any home health care or Assisted Living stay, which is important to take into consideration when choosing a benefit period since most people that do require nursing home care do opt for home health care and Assisted Living prior to entering a nursing home. Lifetime benefit period should be considered if it is affordable and if you have longevity and/or dementia that runs in your family.
Inflation Protection - Long Term Care costs are expected to rise in the future, so it is recommended to purchase some type of inflation protection. There are three different types of Inflation Protection that is offered on most policies.
Simple Inflation increases the daily benefit by 5% of its original amount. With simple inflation, benefits will double every 20 years. Compound Inflation is very similar to simple inflation except the daily benefits are increased by 5% of the previous year's amount. Benefits will double every 15 years with this type of inflation.
Some companies have the option of a Guaranteed Purchase Option (GPO) AKA Future Purchase Option. GPO gives an individual the option to increase the daily benefit. This is typically offered every 3 years.
Elimination Period - This is the time where you will be responsible to pay for the cost of your care before your Long Term Care insurance policy will begin to pay benefits. This is also known as a Deductible. The time period on policies are usually 30, 60, 90, 180, and 365 days. A 30 to 90 day Elimination Period is usually recommended.
These benefits listed above are just the core benefits that all Long Term Care insurance policies have. Most companies do offer other policy benefits which are typically known as the "bells and whistles", such as Nonforfeiture, Return of Premium, Shared Care, Restoration of Benefits, and Survivorship. These are all typically optional benefit riders which do cost extra.
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