That's right - the short and thick LTC policy! So what exactly is a fulfillment period? The coverage period is the number of years that you ONCE claim (need help bathing and dressing or have some cognitive impairment (Alzheimer's or similar) that the insurer has… Long-term care insurance an important component called the benefit period that greatly affects premium costs. This article discusses what I call "Short and Fat vs. Long and Skinny LTC Policy". That's right — Short and Fat LTC Policy! So what exactly is a benefit period? the benefit period is the number of years that HOW YOU DEMAND (need help with bathing and dressing, or you have a cognitive impairment (Alzheimer's or similar) after which the insurance company will pay you the daily or monthly benefit that you chose when you applied for So if you bought a benefit period of say 5 years, once you qualify for benefits and meet the co-payment (how many days of care you have to pay out of pocket), the insurance company will pay them, in this case they pay the maximum 5 years. The term of benefits, whether a fixed number of years, say for example 6 years or unlimited years, represents the MAXIMUM period if you have used the FULL selected daily or monthly benefit that your policy If you had Alzheimer's for 9 years, the policy would be after these 5 years used up and you would pay from your own money for the last four years. Most insurance companies have several payment periods. choose from. It's usually 2, 3, 4, 5, 6, 7 or 10 years OR an unlimited benefit period (say you claimed 35 years due to being in a wheelchair or something). Most long term care policies have at least four or five different benefit periods from the options above that you can choose from for your policy. The benefit period, whether a set number of years, say for example 4 years or unlimited years, is the MAXIMUM period if you used the FULL selected period per day or the monthly benefit that your policy would pay per claim. Now for the "Short and Fat" part... It's been a long time since there was a huge difference in premium prices for 5 years of benefits compared to an unlimited policy. Since there wasn't much difference in cost, many clients chose the Unlimited benefit to protect themselves from the HUGE potential disaster of needing help with bathing/dressing, etc. for DECADES — not just a few years. But today there is a much bigger difference in premium prices for unlimited. So what to do? First let me say that one of the largest LTC insurance companies has statistics showing that only 11% of their claims last longer than five years. Of course, this means that about 90% of receivables last less than five years. So the odds are very much in your favor that you will never need a policy that pays out for unlimited years. So compared to a policy that offers an unlimited benefit period, you can get a much higher daily/monthly dollar benefit that you are much more likely to actually use and benefit from. Any unused dollar benefits will extend the number of years of your support period and will not be lost. Also, you are much more likely to use the higher dollar amount over 2-4 years rather than having to pay additional money out of pocket during care with a benefit period that will likely never be reached. But… if you are quite young (30-55) an Unlimited policy may be an option to look at. For older age groups, Unlimited Years benefits will be very expensive and there is probably a better way to structure the policy. So knowing the statistics above, would it make more sense for you to have a Short and Fat policy (with a larger daily or monthly dollar benefit over a shorter period of time) version… a smaller daily or monthly dollar benefit over a longer period of years? I would put my money on Short and Fat!! So if you would normally consider a policy that pays $150 per day for 7, 10 years or an unlimited benefit period... YOU CAN seriously consider a policy that pays $180-200 per day for three to five years instead. It doesn't make sense to pay out of pocket in 3-5 years when you will most likely be ineligible. Keep in mind that in 20 or 30 years, the compound inflation policy add-on will work in your favor by giving you much more purchasing power to pay for your care, by starting with a larger initial benefit! Chances are pretty good that the insurance company will pay more for your care under these conditions.
You must be logged in to post a comment.