While many standard features are automatically included in a long-term care insurance policy, you can control the premiums you pay and the benefits you receive when you select the key benefit choices in a policy. Below are descriptions of the most common benefit choices in policies, and tips on selecting what is right for you.

Daily/Monthly Benefit

The daily or monthly benefit you select is the maximum dollar amount that the insurance company must pay for your care on a given day or for a month. A monthly benefit (some policies pay this benefit out as a weekly benefit) allows you to receive benefits for expenses on specific days that are greater than an equivalent daily benefit but only up to the monthly benefit limit.

The daily benefit choices may range from $50 to $500 per day ($1500 to $15,000 per month) depending on the carrier.

If you are purchasing a reimbursement policy, most companies will allow the amount of the daily or monthly benefit that you did not use to be carried over, which extends your benefit period. For example, if your daily benefit amount was $150 and your expenses were only $100, then the remaining $50 would be carried over to be used later. This could therefore allow a three-year plan to last longer than three years!

If you purchase an indemnity policy, the carrier would pay you the entire daily or monthly benefit regardless of the cost of your care. However, some indemnity policies require some professional care each day to receive a benefit for that day. Also, some reimbursement policies have an option to receive a portion of the monthly benefit (e.g., 40%) in cash to use however you need without requiring any receipts.  This is in lieu of submitting bills to qualify for the full benefit and can be selected on a month-to-month basis.

Tips:

1. Research the average daily cost of care in the area you are planning on retiring to ensure you select the appropriate daily benefit amount.
2. You do not have to buy insurance for the full cost of care.
3. The more discretionary income you have, the lower the daily benefit you may want to purchase.
4. Consider the extra cost if you want extended home care (> 8-hours) or a private room in a facility when selecting your daily benefit.

Home Care Benefits

This benefit provides for care in your own home. This can include skilled professionals like registered nurses and licensed therapists , home health aides and personal care attendants, as well as homemaker services. Adult day care benefits are usually included also.

The home health care benefit the carrier will pay is usually based on a percentage of the daily benefit. For example, if you choose a 100% home health care benefit, you would receive 100% of the daily benefit you selected for services in your home. The choices vary by carrier, but some other examples are 75% or 50%.

Tip:

If it is important for you to stay in your home, you will want to choose 100% home health care options. If you do not have a primary caregiver or live alone, home care may not be in your best interest, since you may require around the clock care and 24/7 home care can be prohibitively expensive for most people.

Benefit Period

The benefit period you select is the minimum amount of time that you will receive benefits. When you select a benefit period, it is usually expressed in years. This can range anywhere from two years to unlimited years (lifetime coverage).  

IMPORTANT:  The benefit period is not a time limit, but a multiplayer. The daily or monthly benefit is multiplied by the benefit period you chose to equal a lifetime maximum, or pool of money to pay for your care. For example, if you purchased a three-year benefit period with a daily benefit of $100, this would give you a pool of money (lifetime maximum) of $109,500 (1,095 days X $100).  If you only use $50/day, your policy will last six year.

Tips:

1. The more assets you have, the shorter the benefit length you may need.
2. If you have a family history of Alzheimer's or simply longevity, you may want to consider unlimited benefits. Alzheimer's patients have been known to require care for more than 10 years.

Elimination Period - The "Deductible"

The "deductible" on LTC insurance is called an elimination period. The elimination period is the length of time you must pay for long-term care services before the insurance policy begins to pay benefits. Examples of deductibles available are: 0, 30, 60, 90, 100, 180, 365, or even 730 days. When you choose your deductible you are agreeing to pay for any charges during those days. Generally, the longer the elimination period, the lower the premiums. But remember, the lowest premium is not always the best value.

Tips:

1. The more savings/assets you have, the longer the elimination period you can get by with.
2. The younger you are, the more important it is to consider the FUTURE cost of the deductible, since the cost of long-term care is expected to increase with inflation. It may be more cost effective over the long run, to select a shorter deducible.
3. Choose a policy that only requires you to meet the elimination period once in a lifetime.
4. Also consider the alternative use of your premium dollars relative to any savings from selecting a longer elimination period. Could your premium savings be reinvested to make up the difference in increased exposure if you have to self-insure for a longer period of time?
5. Usually, the younger you are the smaller the premium savings because of a longer elimination period, but your future exposure could be dramatic 20 or 30 years from the time of purchase if you assume an extra 60 days of risk (the difference between a 30 and 90 day elimination period; for example).

Inflation Protection

When you purchase long-term care insurance, you will want your policy to stand the test of time. 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 can double or triple what they are today. Depending on the state that you live in, you will have several choices of inflation protection options.

The most common inflation protection options in long-term care policies are: 5% compound, 3% compound, CPI-linked compound (increases match the rate of the Consumer Price Index) and 5% simple (equal) increases. These options automatically increase your benefits over time, but your premiums are designed to stay level for the life of your policy. If inflation for long-term care runs five percent annually, a nursing home that now costs $110 per day would charge more than twice as much a day in 15 years. Without this protection, your policy could cover less than half of your care costs at that time.

- 5% compound doubles the benefit every 15 years - 4x in 30 years
- 3% compound doubles the benefit every 24 years - 4x in 48 years
- (CPI-linked compound is projected to increase on average 2.5% - 3.5%/year and is considered an equal benefit to a fixed 3% option)
- 5% simple will double the benefit in 20 years, but because it's an "equal" increase every year, it takes another 40 years (60 total) to increase 4 times.


Tips:

1. If you are 61 years or older, 5% simple increases may be sufficient
2. If you are younger than age 60, compound increases make more sense because it will increase the benefit amount faster and to a greater degree in the long run.

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