Dollar Amount and Length of Desired Coverage

When choosing a long term care insurance policy, two of the most important things to consider are how much the policy will pay and for how long. These two factors will help to determine the cost of your policy and how much, if at all, you will have to pay out of pocket for long-term care.

Long-term care insurance policies typically express the amount they will pay in terms of a daily benefit. This amount (expressed in dollars) is the maximum amount the insurance company will pay for your long-term care. If your policy provides for a daily benefit of $250, for example, and you enter a nursing home that charges $300 per day, you are responsible for paying the $50 per day difference out of your pocket.

Some policies provide a lesser amount for lower levels of care. For example, a policy may provide for 50% of the daily benefit amount for home care. Continuing the previous example, this policy would pay up to $125 (50% of $250) for care provided in the insured’s home.

Most policies identify the number of years for which they will pay benefits. A policy may pay for three, five or seven years, or it may offer a lifetime (unlimited) benefit.

The longer the benefit period, the more expensive the policy will be. For policies that offer a reduced benefit for home care or assisted living, the benefit period may be extended. For example, if a policy pays $250 per day for five years for skilled nursing care, it may pay $125 per day for ten years for home care or assisted living.

Many people choose a long-term care insurance policy that offers at least five years of coverage, because Medicaid has a five year “look back” period when determining eligibility. In other words, if you apply for Medicaid, they will look back at your financial records for five years to make sure you have not given away or “hidden” any assets. A five-year long-term care policy will pay for those five years, and you will be eligible for Medicaid once the policy is exhausted.