This will be the first in a three part series covering the benefit selections that all long term care (LTC) insurance carriers require. This post will cover selecting your maximum monthly benefit. Part 2 will address the selection of your benefit period with the final installment will focus on the selection of your elimination (deductible) period.
The first required benefits selection in designing your policy is your maximum daily or maximum monthly benefit. This benefit represents the maximum amount of money you will be paid by the insurance company once you have qualified for benefits and satisfied your elimination (deductible) period.
I suggest considering a maximum monthly benefit as it protects you in the event that on any given day you incur costs exceding the limits on the maximum daily benefit. The scenarios below will illustrate the advantage of a maximum monthly benefit.
Scenario 1: You have a maximum daily benefit of $170 per day. On Monday the cost of your care is $300. Because you have a limit on what is paid daily ($170) you would be required to pay the difference between the $170 and $300. You would be paying $130 out of pocket for that day’s care.
Scenario 2: You have a maximum monthly benefit of $5,100 (an average of $170/day). As in Scenario 1, on Monday the cost of your care is $300. Because you have no limit on what is paid daily (just a total amount that can be used during the month of $5100), you would have no out of pocket for that day’s care, it would simply be deducted from your monthly total. By having a maximum monthly benefit, your policy will pay the cost of your care on any given day, up to your maximum monthly benefit.
When it comes to selecting the amount for the maximum monthly benefit, look at the actual cost of care in your area, based on today’s dollars. To find out what these costs are, go to http://www.ltcconnects.com/state_offering/index.php and click on your state.
As a general rule, choosing a maximum monthly benefit that will pay somewhere around 75% of your state’s average, is a good starting point.
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