Long Term Care Insurance
How Long Term Care Insurance Works
Long Term Care Insurance is a retirement planning tool. It can help protect your assets and family from the high cost of long term care services. Long term care insurance policies provide great flexibility in benefit design. This lets you choose long term care insurance protection that best suits your financial and personal needs. Long term care insurance can cover all types of settings: Home care, adult day care, assisted living facilities, nursing facilities and hospice care.
Like life insurance, you select a long term care insurance policy value such as $250,000, $500,000 or a $1,000,000. The table below outlines the process of choosing your long term care protection. Some choices will vary by company. Your long term care insurance agent will provide recommendations based on your health history, financial situation and other factors.
Choose Your Long Term Care Insurance Benefits ( A x B = C )
|(A) Maximum Daily Benefit||(B) Benefit Period||(C) Policy Maximum Amount|
Select a Maximum Daily Benefit from $50 to $500 per day.
Select a Benefit Period.
|Your Policy Maximum Benefit will equal the Maximum Daily Benefit Multiplied by the Benefit Period you select.
For Example: $100 (Maximum Daily Benefit) x 730 days (2 year Benefit Period) = $73,000 Policy Maximum
|SAMPLE POLICY 1: $200 DAILY BENEFIT X 3 YEARS (1,095 DAYS) = $219,000 POLICY MAXIMUM
SAMPLE POLICY 2: $300 DAILY BENEFIT X 5 YEARS (1,825 DAYS) = $547,500 POLICY MAXIMUM
SAMPLE POLICY 3: $500 DAILY BENEFIT X 6 YEARS (2,190 DAYS) = $1,095,000 POLICY MAXIMUM
Indemnity Vs Reimbursement Long Term Care Insurance Policies
Now, let’s look at Indemnity Vs Reimbursement long term care insurance plans. And there is also a cash benefit plan, which is a close cousin to the indemnity long term care insurance policy. Each type has its advantages, generally based on the needs of the insured at time of claim. Understanding the differences at the time you buy insurance helps you make the best choice for your future needs.
Reimbursement long term care insurance policies pay for the actual daily (or monthly) cost of care. For Example, if your selected daily benefit is $100 and the actual cost of care you receive is $90, your long term care insurance policy will pay $90. Any excess daily benefit remains for your future care needs. If your care cost is $120 daily, you will receive $100 per day and you must pay the excess amount.
A potential advantage to this type of payout is that your benefits can last for a longer period of time, if your actual cost of care is less than your daily benefit. In other words, the 3 year plan referenced above could pay benefits over 5 or more years depending on how fast you draw down the policy maximum.
Indemnity long term care insurance policies pay your selected daily benefit as soon as you qualify for benefits. You receive this amount regardless of the actual cost of care. For example, during early stages of home care a person may incur a lower cost of care due to more limited needs. Or care costs could be lower because their spouse is providing some care. A reimbursement plan pays the actual cost of care, while the indemnity plan pays the maximum daily (or monthly) benefit. Indemnity plans even allow you to put money in the bank. The advantage of an indemnity long term care plan is the potential to receive more money each month than you incur in expenses.
Cash Benefit long term care insurance policies pay a cash benefit irregardless of your actual expense. This allows you to use the payment for anything or anyone (caregiver can even be a family member), even anywhere in the world. There is little difference between an indemnity policy and a cash benefit policy when receiving care in an expensive long term care facility. Yet, there could be a big difference between a cash benefit and a reimbursement policy when receiving care at home. Because a cash benefit policy will pay for anyone or anything. For example, typical reimbursement and indemnity long term care plans exclude payments for family members providing care. But a cash benefit policy would not limit you in this respect. It pays your “cash benefit” as soon as you qualify for benefits.