by Gregory Gambone

Created on: March 27, 2009

The bulk of a Long Term Care (LTC) insurance policy is composed of three separate and distinct features, each of which can be customized to create an insurance policy that suits the needs and budget of the owner. Of course, since there are hundreds of insurance companies, each with their own proprietary LTC product, there will also be various bells and whistles that will differ for each insurance carrier. However, the three main aspects of an LTC policy will remain the same regardless of the insurance company from which the policy is purchased.

The first major building block of an LTC policy is called the "elimination period". Once a person becomes eligible to begin receiving the policy's benefits, the length of time that must pass before benefits actually begin is called the elimination period. There are multiple options offered by each insurance company, but they are all generally identical. The most common elimination period choices are: 0 days, 30 days, 60 days, 90 days, 180 days, and 365 days. Obviously, the longer a person is able to pay for their own care once they actually need it, the lower the premium payments for an LTC policy will be. The elimination period choice should be considered carefully and take into account the owner's current and future financial resources.

The second major building block of an LTC policy is called the "benefit amount". This is the amount of money that the insured will begin receiving once they have passed the elimination period. This amount is typically discussed as a monthly or daily number. The national average cost for nursing homes and assisted living is more than $200 per day (and more than $300 per day in the northeastern part of the country). Again, the policy owner's benefit amount choice should be considered very carefully. More money requried from the insurance company in the event that care is needed will result in higher premium payments for the policy.

The third and final building block of an LTC policy is called the "benefit period". This term refers to the length of time that benefits will continue once they have commenced. Nationally, the average length of time that care is required is between two and three years. For this reason, LTC policies typically have benefit period choices that begin at two years, with additional options extending the benefits to five years or even for the rest of the owner's life. Those policies with longer benefit periods will be significantly more expensive than those with shorter benefit periods.

All three of these basic components of an LTC policy should be carefully considered and analyzed prior to actually purchasing a policy. The ability to adjust and manipulate each of these aspects individually gives the policy owner a good deal of flexibility to create a customized insurance policy that fits within existing financial confines. However, due to the complex nature of these types of products, it is highly recommended that anyone considering the purchase of an LTC policy seek the guidance of a certified and experienced Long Term Care advisor. That person's function should be to assist with understanding the additional features and benefits that may come with one company's product versus another, as well as comparing policy costs and insurance company fundamentals.

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