BUILDING A POLICY – WHAT'S RIGHT FOR YOU

Long-term care insurance policies are individually designed; there is no "one-size fits-all" policy. As a result, confusion often exist over which benefit levels are most appropriate, which available policy riders should be included, and how much each consumer should pay for adequate coverage.

Many advisors agree that a balance should be established between how much risk the consumer wants to transfer to the insurance company (vs. "self-insure") and how much they are willing to afford in premiums. These factors vary widely from person to person, couple to couple.

Most policies are "integrated" policies, meaning they will pay for care provided in the home, assisted living facilities, adult day care facilities, and/or at skilled nursing facilities (nursing homes). You, your family, and/or your Doctor will decide where care is to be received; the insurance company's job is to write checks.

Building upon the basic structure of a comprehensive LTC policy involves carefully selecting specific benefit levels in each of the four basic "CORE BENEFIT CATEGORIES", each with its own sets of variables, and each affecting the final premium outlay (cost). Higher benefit levels imply higher policy premiums.

The four basic "CORE" benefit categories include: Daily Benefit Amount, Lifetime Benefit Period, Inflation Protection Riders, and Elimination Period.

Maximum Daily Benefit Amount: This amount is the maximum dollar-per-day the policy will pay, and is usually calculated in $10.00 increments. You can purchase a LTC policy that pays a daily benefit of as little as up to $70/day, to one that pays up to $500/day, and anything in-between. The average daily rates charged by various nursing homes in your immediate surrounding area should be used as a benchmark guide in determining and selecting your policy's Maximum Daily Benefit Amount.

Maximum Lifetime Benefit Amount: Most policies offer both a "Limited" benefit plan and an "Unlimited" benefit plan. With a limited plan, the total dollar amount the company would pay over the life of the policy is limited by an amount which you have preselected when you purchased the policy. Limited plans are expressed in years, and can range from two years to six years. The limited plan's maximum benefit amount is created by multiplying the "daily benefit amount" you have selected (i.e. $150/day), times the number of days in 2-years/3-years/4-years/5-years 6/years: i.e. $150/day X 1460 days (4 years) = $219,000, creating a "pool of money" from which to pay for care. Once this pool of money is depleted, the policy is exhausted. However, if you do not spend the maximum per day, the pool of money ($219,000) would last longer than its designated time (4 years). We spend money, not time. An "Unlimited/Lifetime" plan has no duration limits, and would continue to pay for care as long as it is needed

Inflation Protection Riders: The costs of long-term care are expected to increase just like they have done in the past. In fact, over time, the costs of long-term care will double or triple what they are today. The inflation protection option allows you to proactively address this issue by causing the value of your policy to consistently grow at 5% per year, contractually. The 5% compound inflation option doubles in value about every15 years, i.e., $150/day grows to $300/day.

Elimination Period: This is the number of days that someone other than the insurance company would be responsible to pay for your care, somewhat like a "deductible", only we "spend" time (days), not money. Elimination period options are most commonly offered as zero, 30, 60, or 90 days, and there are reasons and strategies of each. LTC companies vary in how they count these days, and this could be important.

These four "CORE BENEFIT CATEGORIES" are the basic ingredients of a comprehensive LTC insurance policy. Purchasing a long-term care insurance policy should focus on YOUR long-term financial needs and goals.

See > Reasons Others Have Purchased LTC Insurance

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