This is the second in a three part series covering the benefit selections that all long term care (LTC) insurance carriers require. The first installment focused on the selection of your maximum monthly benefit. This post, Part 2, will cover selecting your benefit period. Part 3 will address the selection of your elimination (deductible) period.
Your benefit period is the number of days or years that you would like the insurance company to pay you your maximum monthly benefit. You may select two to ten years, or an unlimited number of years.
Take a look at how the math works.
Let’s assume you select a maximum monthly benefit of $5000 with a benefit period of five years. Multiply $5000 by the number of months in five years (60), and you get the value of your policy, $300,000. Simply put, with long term care (LTC) insurance, you are buying access to a chunk of money, with a value that can be represented by the following calculation; “monthly benefit x benefit period.”
You can’t use your pool of money ($300,000 in this instance) up any faster than 60 months. However, it can last longer in the event that on any given month the cost of your care is less than $5000. For example if your care cost $3000 on any given month the insurance company would pay you $3000 and the difference would remain in your account, extending how long your “chunk” of money lasts beyond 5 years.
If you choose and unlimited policy there is no “pool” or “chunk” of money because the insurance company will pay you up to your maximum monthly benefit for as long as you need it.
My recommendation is to purchase a 5 year policy. This is based on recent statistics of the average stay/length of time care is needed
- Home Health Care (4.5 years)
- Assisted Living (18 months)
- Adult Day Care (2.4 years)
- Nursing Home (average of 4.9 years with women at 5.7 years and men at 4.2 years)
Next we will cover the elimination/deductible period.
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Wow great information about the duration of the insurance policies among the insurance policies home care insurance has more duration i,e 4.5 years.