Today’s blog post continues the series about buying long term care insurance as a strategy for planning ahead for long term care. My post of May 22, 2014 discussed whether to buy long term care insurance at all. My post of May 29, 2014 suggested looking for a stable, proven insurer. My post of June 5, 2014 described how to identify a proven, stable Long Term Care insurance company. My post of June 12, 2014 discussed the importance of protection against inflation. My post of June 19, 2014 suggested planning to use insurance to pay for four or five years of long term care. My post of June 22, 2014 suggested a daily rate to choose when purchasing long term care insurance. My post of July 10, 2014 advised to look carefully at the list of Activities of Daily Living that can trigger coverage from the long term care insurance policy. The introductory post in the series on planning ahead for long term care costs appeared on May 15, 2014.
Today’s post will discuss the differences between long term care insurance policies that pay for a set period of time and long term care insurance policies that pay out a certain sum of money.
Some long term care insurance policies pay for a certain period of time that the insured needs long term care. (We’ll call these Period-of-Time policies.) It doesn’t matter to the insurance company whether the insured person needs just a little help (i.e., the cost is low) or extensive (i.e., the cost is high) help. As long as the policy pays out for a long enough period of time to cover the average stay in a nursing home or to cover the look-back period to qualify for Medicaid (both of which were discussed in my post of June 19, 2014,) a Period-of-Time policy should satisfy the insured person’s needs.
Other policies pay out a certain amount of money (i.e., the daily rate chosen in the policy times the number of days or years chosen in the policy.) (We’ll call these policies Pile-of-Money policies.) If the care that an insured person needs costs less than the daily rate set forth in the policy, the coverage could last longer than originally planned.
Because of their greater flexibility, I prefer the Pile-of-Money policies. If, however, a particular applicant can save significantly on the cost of premiums, a Period-of-Time policy is a good choice.
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