Most people can't afford to buy a gold-plated long-term care insurance policy that offers a large daily benefit covering any possible need and that will continue paying indefinitely. If premiums for this type of Cadillac plan are not in your budget, what should you cut, the daily benefit amount or the number of years of coverage? Most financial experts advise cutting the length of coverage. This is because if you don't use the full daily benefit, you don't lose it. In fact, it can be used to lengthen your period of coverage.
Think of a long-term care insurance policy as a pool of funds for long-term care. So, for instance, a two-year policy paying a daily benefit of $200 is really a $146,000 long-term care fund (365 x 2 x $200). If the policyholder draws on the policy at the rate of $100 a day for one year, she will still have $109,500 ($146,000 - $36,500) to pay for future long-term care costs, whether at home, in assisted living, or in a nursing home -- no different than if she had purchased a four-year policy paying $100 a day in benefits.
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