Long Term Care Insurance Basics

The Four Main Parts of a Long Term Care Insurance Plan

1)Daily Benefit

The daily benefit is the amount of money that the insurance company will pay for your care on a daily basis if you need long term care. It is recommended that you base your daily benefit on the cost of a semi-private nursing home room or a private nursing home room depending on your preference. Even though you may receive home care or stay in an assisted living facility, nursing care is the most expensive type of care. Planning in this way would give you full coverage, but not everyone needs this much long term care insurance. Click here for an excellent web site to show you the costs of long term care in your area.

2) Benefit Period

The benefit period is the amount of time that the insurance company will pay your daily benefit once you go onto a long term care claim, but it is not a time limit. For instance, if your daily benefit is $100.00 per day and you choose a benefit period of three years, you multiply the number of days in three years by $100.00 per day. This would be 1095 days times $100 which equals $109,500. This would be your lifetime maximum, and if it takes you more than three years to spend it, that is not a problem. The benefit period is not a time limit for your long term care insurance plan.

3) Elimination Period

The elimination period is your deductible or waiting period. When you need to use your long term care insurance policy, you must pay out-of-pocket for your care for the entire elimination period you selected. A 90 day elimination period means that you have 90 days of out-of-pocket expenses. As long as your elimination period is based on calendar days and not days of service, you will receive benefits from your long term care insurance on day 91.

4) Inflation Protection

Inflation protection is the most critical component of a long term care insurance policy. This rider increases your daily benefit and lifetime maximum every year by a specified amount while your premiums stay level.

You can choose inflation protection that compounds annually or does not compound at all. Usually anyone under age 70 should consider the compounding inflation protection. Let's say your inflation protection on your long term care insurance policy is 5% compound. This means your daily benefit will increase by 5% per year and the interest is compounding. This in turn also increases your lifetime maximum by 5% compound.

Year 1: $100 per day

Year 2: $105 per day

Year 3: $110.25 per day - the compounding comes into effect by taking 5% of the previous year's amount as opposed to the first year amount of $100.00