So you’ve made the decision to learn more about long term care insurance. It’s smart, like health insurance nor Medicare will pay for long term care services extended in case you need them in the future. Plus, there is about a 70% chance you will need some type of long-term care after age 65, according to government statistics. And given that the cost of long term care can quickly deplete your life savings, it only makes sense to add your financial plan.
As you prepare for the upcoming investment or purchase, you may experience some foreign language or terminology in your research, which can be frustrating and really confusing.
Looking for long-term care insurance policy is no different. Long Term Care Insurance Policy describes the coverage under the policy, exceptions and limitations… and can be loaded with industry jargon. Below are details of the basics:
There are four main components that determine the long-term benefits you and affect your monthly expenses.
1. How much.
This is a total maximum benefit available under the policy. There are plenty of maximal to choose from, ranging from $100,000 to $250,000, $500,000 or more. Benefits available until you receive your maximum profit in total.
2. How fast.
This is a monthly limit that you can access from your total maximum profits. The insurance company pays you “how many” in one lump sum. Instead, you access your profits in smaller amounts on a monthly basis to a monthly maximum predetermined.
Depending on the carrier you choose, your monthly maximum can range from $1,500 to $10,000 per month. “How much” and “How fast” components work together to determine how long your coverage will take place. If your monthly maximum (“quick way”) was $5,000 and the maximum total of your policy (“how much”) is $250,000, it would take about 50 months (four years, two months) prior to exhaust the benefits of your policy. If you need $2,000 per month to pay for nursing home care, for example, it could take more than 10 years for disposal of $250,000 policy. The bigger you “how much” and “how fast”, the higher your premium will be.
This determines how your benefits grow over time. The most common growth rate is 3%. If the policy you start with $176,000 in your “how much” and $4,500 in your “how fast”, 3% annual growth rate will double your profits in 24 years for maximum profit total $352,000 and $9,000 maximum monthly respectively.
You also have the option to choose other than the 3% growth rate or to increase your maximum advance and the rates of growth all together. Specialists can help you identify growth rates that best suits your objectives and budget.
Long term care insurance has the elimination period, such as deductibles, determine how much you might have to pay out of your pocket before benefits are paid. One difference to note is that the elimination period is expressed in days, not dollars. Most often been the elimination period is 90 days. This usually means that you have to receive 90 days of treatment you pay for out of your pocket before benefits are available.
Not that difficult when put simply, right? I hope you feel better prepared in your search for the right policy and that I also have removed some of the confusion. Long term care insurance is here to help you live the lifestyle you want 10, 20, even 30 years.