Financial Information: Understanding Long Term Care Insurance

How Much Insurance To Buy

Long term care insurance policies pay a daily maximum amount for covered services. When you buy a policy, you decide the value of the daily maximum amount and the length of time your benefits will run. For example, if you buy a policy that pays up to $100 per day for three years, the policy value is $109,500, lifetime maximum.

Reminder: No policy guarantees to cover all costs of long term care without a limit.

Because most retirement income is fixed and may not keep pace with inflation, your ability to afford premiums may diminish. Buying too much insurance may mean that you cannot afford to pay the premium later. Knowing the following four components will help you determine how much insurance to buy:

• Benefit Amount – This is the daily maximum amount that a policy will pay each day.
• Inflation Adjustment – This is the increase of the benefit amount to cover the impact of inflation. Generally, companies offer a five percent inflation protection.
• Benefit Period – This is the time the policy will pay for covered services.
• Deductible Period – This is the number of days for covered services before the policy pays (also called "elimination period").

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