You may have noticed that Long-Term Care Insurance policies often have benefit periods. Does that mean you only have a policy for so much time - or only have a certain number of years of care?
While many Long-Term Care Insurance policies often have a benefit period, it usually is not a time limit that defines the amount of care you will be able to receive. The benefit period helps calculate the amount of money in your policy at any given time.
LTC Insurance Creates a Benefit Account
Today, most Long-Term Care Insurance policies are "pool of money" products. What this means is the policy creates a benefit account worth a certain amount of money.
There is no "stopwatch" with Long-Term Care Insurance. It all has to do with the amount of money in the policy.
You will start with a specific monthly or daily benefit and an initial pool of money. Both grow with an optional inflation benefit you select in advance. Some companies create the initial benefit account by using a benefit period. They do so with a math formula - the number of days or months in the benefit period x the daily or monthly benefit = the initial benefit account or pool.
At the time of claim, if you don't use the maximum, you are entitled to each month, or each day you don't lose the remaining benefit. It stays in the benefit account and continues to grow with inflation (if you have an inflation benefit).
Take a look at this example:
$4000 a month with a three-year benefit period.
the math formula is:
(4000 x 12) x 3 = $144,000
The policy in this example would start at $4000 a month with $144,000 in the benefit account. If the policy has 3% compound inflation, that will increase BOTH the monthly benefit, and the benefit account grows every year. That is already factored in the cost of the premium.
If you are age 50 when you get the policy in this example, your benefits at age 85 would be:
$405,196 total in the benefit account
$11,255 a month in benefits available
Unlimited benefits are not available with most insurance companies. Many companies offer shared spousal benefits so that a couple can share benefits between the two partners. This shared benefit works a little differently with each company but is a popular option.
The larger your initial benefits, the longer your benefits will last when you need long-term health care. Most Long-Term Care Insurance claims start with in-home care and slowly progress.
A qualified and experienced Long-Term Care Insurance specialist can work with you and design an appropriate plan that fits your budget and your needs.