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The following are the basic factors in calculating the cost of a long term care insurance policy. After the basic choices are made, a person may select additional options or riders. The premium is then calculated based on the individual's age and applicable discounts.
The Benefit Period is the length of time the policy will pay benefits. Benefit periods typically range from two to ten years, or some choose a lifetime benefit period.
The Maximum Daily Benefit is the maximum amount the policy will pay for care per day for covered benefits. Some policies pay benefits based on a monthly maximum.
An Automatic Benefit Increase is wise to have since the cost of care will increase in the years to come. Automatic increases are typically based on either simple interest or compound interest.
The Care Setting is also a factor in the cost of the policy. Most policies now provide the option to have care provided in the home or assisted living facilities, in addition to nursing home care. Home care daily benefit options generally range from 50% to 100% of the daily nursing home benefit. Some policies provide a home care benefit that is greater than 100% of the nursing home benefit.
The Elimination Period is like the deductible on health insurance. Most policies require that you pay for needed care for a specified number of days, called the elimination period, before the policy starts to pay the daily benefit. Elimination periods can range anywhere from 0 to 365 days. A person should choose an elimination period that is in line with the ability to pay out of pocket costs before the policy starts paying benefits.
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