When a choice has to be made, most of us would choose to have insurance for our home and car rather than buy long term care coverage. This is because we find it difficult to associate ourselves with old age, of which long term care is commonly linked. However, the odds of acquiring a debilitating condition that would make us dependent to others for care is higher compared to the odds of a home fire (1 in 1,200) or an automobile damage (1 in 250). According to the U.S. Department of Health and Human Services, 7 in 10 of us will need long term care at some point. Having a good insurance policy for this kind of need, therefore, is necessary if we do not want to live on welfare during our most vulnerable years.
Introduced in the mid-1970s, long term care insurance is regarded as the most important insurance product due to the strong likelihood of us needing the services it covers. As long as benefits are chosen carefully, owning a policy need not be as financially challenging as most thought it would be.
The following are four of the main factors that affect the costs of long term care coverage.
1. Daily Benefit Amount
The daily benefit sets the maximum payout the policy owner can receive from his insurance provider. In indemnity policies, the exact daily benefit amount is paid regardless of how much the cost of care is while in reimbursement policies, the insurance provider pays for the valid costs of care up to the exact benefit amount of the policy. A high benefit amount would lead to more expensive premiums.
2. Benefit Period
The benefit period refers to the length of time the policy will continue paying for benefits from the point of claim. The longer it is, the more expensive premiums become. The most appropriate benefit period is 3-5 years because according to the American Association for Long Term Care Insurance, the average length of claim is just 2.8 years.
3. Elimination Period
The elimination period is also referred to as the waiting period, and it refers to the length of time that the policy owner has to pay for his own care before his policy starts paying. People who want to save on premiums can choose to have longer elimination period, however, they must be prepared for higher out of pocket expenses by the time they need care.
4. Inflation Protection
The inflation protection rider increases the benefit amount in a yearly basis to keep up with inflation. This could be one of the most important long term care coverage riders; however, it can also increase premiums.