What Am I Buying?

What’s My Benefit?

Think of long-term care benefits as flowing from a pool of money.  You determine when and how fast benefits will flow at the time you apply for your policy. 

You may include provisions that speed up the flow under certain conditions, that periodically increase the size of the pool, that refill the pool after some benefits have been taken from it.

For example, if you select a five year benefit period, and a monthly benefit of $5,000, your pool of money will be $5,000 x 12 x 5 or $300,000.

If, on claim, you access your pool at the rate of $5,000 a month continuously for 5 years, the pool will be emptied and your policy benefits will cease.  If your care requires less than $5,000 a month, your pool will last longer than 5 years.

Endless pools are neat in architectural designs.  In the past, LTC insurers offered policies with "lifetime" or "unlimited" benefits.  No more.  The maximum benefit period available as of June, 2015 is 10 years, and, in our opinion, is at least statistically a waste of money.

Be sure to consider various benefit periods in structuring your policy.  You may be more comfortable with a 5 year benefit period, recognizing that you've substantially hedged the statistical bet.  That bet, as we noted earlier in the Probabilities, is that about two-thirds of us who reach age 65 will thereafter need some long-term care, and that we'll need such care for an average of 3 years. Consider also a 3 year benefit period.  Once again, the point is to secure a level of coverage with which you, given your health history and reasonably foreseeable financial circumstances, are comfortable.

If you’re applying with your spouse or partner, the inclusion of a provision for “shared care” (which we’ll discuss a little later) could provide a very economical way of more generously hedging that bet for one of you compared to each of you buying a very large pool of money.

Alzheimer's and other forms of dementia are a concern most of us share, certainly in part because of the longer term of care they may require.  We believe, however, that, if you approach your long term care planning personally, considering your health history and that of your family, the foreseeable resources available to you, and the many options available from those major LTC insurers likely to look favorably on an application from you, you will be able to develop a reasonable plan for your future care.