How does long-term care insurance work?
Long-term care insurance policies pay a set dollar amount per day for covered care during the benefit period stated in the policy. Example: You choose a policy that pays $160 per day for five years. The maximum that policy will pay is $292,000 ($160 per day, times 365 days, times 5 years). The older the individual covered, the higher the premium. For instance, premiums for a set amount of coverage on a 70-year-old individual are about three times those that would apply to a 50-year-old. Most long-term care policies are indemnity-type policies, meaning they will pay (up to the policys limits) for actual charges by the care provider. Some long-term care policies, instead of being based on indemnity, pay daily benefit amounts to the insured rather than paying for actual charges. The latter type of policy offers insureds greater flexibility (e.g., allowing them to pay for home care) and less paperwork.
