Elements of LTC Insurance - Daily or Monthly Benefit

This will be the first in a short series on the elements that make up a long term care insurance policy. Today we'll focus on the daily or monthly benefit. Choosing the amount of the benefit is one of the reasons you should work with a long term care specialist (not your accountant or financial planner or auto insurance agent). The reason is that if you choose an amount too low, your policy may not pay for the things you need it to in the future.

Knowing the average daily rate in the area you may need care is very important. For example, the national average rate is $150/day for a semi-private room and $180/day for a private room. If you have a policy that only pays $100/day, then you are only insuring 2/3 of the cost of a nursing home. The other $18,000/year comes out of your pocket. That difference doubles every 15 years. That means that 30 years from now you'll be shelling out $73,000 per year to make up the difference. Will your income be able to support that?

The cost of care varies across the country. You need to work with someone who works with facilities on a regular basis. A long term care specialist can help you work through an issue like this to help you determine the most appropriate daily benefit.

Some companies pay a monthly benefit vs a daily benefit. The advantage is increased flexibility in spending your benefit dollars. A monthly benefit is better than a daily benefit.