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LONG TERM CARE - Insurance policies

How Much Do Insurance Policies Pay for Long-Term Care?
1. The Daily Maximum

When you buy a policy you choose the amount you want the company to pay for each day of your care. Most companies allow you to select as little as $50 daily or as much as $500 daily. When you need care, companies pay the daily benefit you selected or the actual cost, whichever is less. Some benefits may be paid as a percentage of another. For instance, a policy may pay $100 a day for care in a nursing home, 80 percent of that amount for assisted living in a Residential Care Facility for the Elderly (RCFE), and 50 percent for home care. Policies sold after October 1, 2001 must pay a minimum of 70% of the daily nursing home benefit for RCFE care, except for Home Care Only policies that don't cover this kind of care.

Selecting the Daily Maximum
Because you will be responsible for all expenses not paid by your insurance policy, you need to decide how much of the daily cost of care you can pay yourself. Estimate the daily cost of long-term care in your community and subtract the amount you can afford to pay for each day of your care. For instance if the cost in your community is $150 a day and you can afford to pay a co-payment of $50 a day, you will need the insurance company to pay $100 a day, or $3,000 each month.

To help the benefits of your policy keep up with the annual increase in the cost of care due to inflation, every insurer is required to offer you Inflation Protection. Although Inflation Protection will increase your premium costs, without it you may not be able to afford to pay the difference between the cost of care when you need the long-term care services in the future and the amount of benefits your policy will pay. Remember that long-term care costs are likely to increase in the future. Unless you choose to add inflation protection, your benefits will remain static and you will have to pay out-of-pocket for the future increases in the cost of care.

Example: The average statewide cost of nursing home care in California in 2002 is $141 a day or $51,465 a year. A policy that pays $141 a day would pay 100% of the daily charges for care in an average cost nursing home today. However, in approximately fourteen years, the average cost of care is estimated to double - a day of care will cost $282 and a year of care $102,930. Without inflation protection, the difference between the cost of care and the benefit will grow each year. In less than 14 years a $141 daily benefit may cover as little as 50 percent of the cost of care.

2. The Maximum Lifetime Benefit
When you buy a long-term care policy, you choose the maximum dollar amount the policy will pay benefits over your lifetime. The approximate number of years you want the policy to pay benefits will determine the Maximum Lifetime Benefit. Policies are available with Maximum Lifetime Benefit amounts that pay benefits for approximately, one, two, three, four or five years or for your lifetime. The longer the period of coverage, the higher the premium. Your Lifetime Maximum Benefit is computed by multiplying the Daily Maximum benefit you select by the approximate number of days you want benefits to be paid. For example, the Lifetime Maximum Benefit will be $36,500 if you select a Daily Maximum benefit of $100 and want the policy to pay benefits for one year (365 days).

While everyone would like to buy Lifetime coverage or Unlimited benefits, not everyone can afford to do so. A policy that pays for a few years can provide valuable coverage, and for some people that will be all they will need. Don't pass up long-term care insurance just because you can't afford lifetime coverage.

Selecting the Maximum Lifetime Benefit
No one can predict how many days or years of long-term care a person will need, or the reason they will require care. Some people can afford lifetime coverage, others have so little money they would quickly qualify for Medi-Cal. Choosing the right amount of benefit depends on the premium you can afford, and the assets you would otherwise have to spend. Since the premium for Lifetime coverage is not affordable for many people, here is one method of selecting the Maximum Lifetime Benefit. Choose the period that is roughly proportional to your current non-housing assets that you might otherwise have to use to pay for your care. (Remember that the value of your house is not counted when applying for Medi-Cal).

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