What Are The Basic Components of Long Term Care Insurance?
As you consider the purchase of long-term care insurance, here are five terms you may not yet be familiar with:
- Daily benefit amount – The daily benefit is the maximum amount your policy will pay once you become eligible for benefits. (We’ll discuss eligibility under point number 4.) Your daily cost for long-term care can vary greatly, depending upon the area of the country in which you live.
- Benefit period – The length of time an insurance company will provide benefits. You may want to take this into consideration: the average nursing home stay is just under three years.
- Benefit pool – This amount is calculated by multiplying the daily benefit amount by the benefit period. For instance, a $300 daily benefit with a 3-year benefit would result in a benefit pool of $328,500.
- Elimination period – The waiting period is the period of time the policyholder would need to wait before receiving benefits from their long-term care insurance, usually 30, 60, 90, 180 or 365 days. As you might imagine, the shorter the elimination period, the more expensive the premium. Think of the elimination period for long-term care insurance in the same way you think of a deductible for your other types of insurance.
- Inflation protection – This component of long-term care insurance allows the policy to keep pace with increases in the cost of providing long-term care. Current increases are averaging about five percent per year.
This should allow you to have a basic understanding of some of the terms used to describe long-term care insurance. Because there is such a wide variety of costs and benefits, long-term care insurance is an extremely complex type of insurance to buy. Get wise advice. Contact your local professional independent agent for help in making your decisions regarding your long-term care coverage.