Short And Fat Ltc Policies Beat Long And Skinny Ones

Short And Fat Ltc Policies Beat Long And Skinny Ones



Long term care insurance policies have an​ important component called a​ benefit period which greatly affectspremium costs. This article discusses what I call "Short and Fat vs. Long and Skinny LTC Policies".

That is​ right -- Short and Fat LTC policies! So what is​ a​ benefit period anyway?

The benefit period is​ the​ number of​ years that ONCE you go on​ claim (need help in​ bathing and dressing or​ have some cognitive impairment (Alzheimer's or​ similar ailment) that the​ insurance company will pay the​ daily or​ monthly benefit that you chose when you applied for the​ policy.

So if​ you bought a​ benefit period of​ say 5 years,​ once you qualified for benefits,​ and satisfied the​ deductible (how many days of​ care that you need to​ pay out of​ pocket),​ the​ insurance company will pay those benefits for a​ maximum of​ 5 years in​ this case.

The benefit period,​ whether a​ set number of​ years,​ say 6 years for example or​ unlimited years are the​ MAXIMUM amount of​ time,​ if​ you used your FULL chosen daily or​ monthly benefit that your policy would pay on​ a​ claim.

If you had Alzheimer's for 9 years,​ the​ policy benefits would have been exhausted after those 5 years and you would be paying for the​ last four years from your own money.

Most insurance companies have a​ number of​ benefit periods to​ choose from. Typically they are 2,​ 3,​ 4,​ 5,​ 6,​ 7,​ or​ 10 years or​ an​ Unlimited benefit period (say you went on​ claim for 35 years due to​ being in​ a​ wheelchair or​ something).

Most LTC policies have at​ least four or​ five different benefits periods from the​ above choices which you can choose from for your policy.

The benefit period,​ whether a​ set number of​ years,​ say 4 years for example or​ unlimited years are the​ MAXIMUM amount of​ time,​ if​ you used your FULL chosen daily or​ monthly benefit that your policy would pay on​ a​ claim.

Now for the​ "Short and Fat" part...

Long ago there wasn't too much difference in​ the​ premium prices for a​ 5 year benefit period compared to​ an​ Unlimited policy. So since there wasn't much of​ a​ cost difference,​ many clients chose the​ Unlimited benefit to​ protect against a​ HUGE potential disaster of​ needing help in​ bathing/dressing,​ etc. for DECADES -- not just a​ few years.

But today,​ there is​ a​ much larger difference in​ the​ premium prices for unlimited. So what to​ do?

First of​ all let me say that one of​ the​ largest LTC insurance companies has statistics that show that only 11% of​ their claims last longer than five years. of​ course this means that about 90% of​ the​ claims last shorter than five years. So the​ odds are very much in​ favor of​ never needing a​ policy that would pay unlimited years.

So compared with 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 benefit period and not be lost.

Also you are much more likely to​ use a​ higher dollar amount for 2-4 years than having to​ pay extra money out of​ your pocket during care with a​ benefit period that is​ probably never going to​ be reached.

But... if​ you are pretty young (30-55) an​ Unlimited policy still might be a​ choice to​ look at. Older ages will find Unlimited years of​ benefits very expensive and there is​ likely a​ better way to​ structure a​ policy.

So knowing the​ above statistics,​ would it​ make more sense to​ you to​ have a​ Short and Fat policy (one with a​ larger daily or​ monthly dollar benefit for a​ shorter period of​ time)verses... a​ smaller daily or​ monthly dollar benefit for a​ longer period of​ years?

I'd 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 MIGHT seriously consider a​ policy that would pay $180-$200 per day for three to​ five years instead.

No sense in​ paying money out of​ pocket during the​ 3-5 years you are most likely to​ remain on​ claim.

Keep in​ mind that in​ 20 or​ 30 years the​ compounded inflation policy rider will work in​ your favor by giving you much more purchasing power to​ pay for care by starting out with a​ bigger initial benefit!

The odds are pretty good that the​ insurance company will pay more out for your care under these conditions.




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