A daily benefit allowance is the maximum amount of money per day that the insurance company will pay for long-term care costs.  (The amount ranges from $50/day to about $500/day.)  Most policies provide for a reimbursement system that covers the costs of expenses incurred.  A few policies operate with the indemnity system.  It is important to read the policy literature to determine how the benefits will be paid.           

When the reimbursement method is used, the insurance company establishes whether you are eligible for services and benefits.  Most policy provisions have requirements for your primary care physician to certify that you need help with two out of six activities of daily living, or that you are not able to live safely without assistance because of cognitive impairment.  Benefits are paid to you or the long-term care provider.           

Policies differ in how the daily benefit is paid.  Some provide for daily reimbursement, others for weekly or monthly payments.  When thinking about real-life situations in which you would access the benefits, it is more beneficial to have a monthly budget to be spent on care than a weekly amount.  And it is better to have access to weekly funds than daily reimbursement.  For instance, with home care, it is likely that you would only need a physical therapist three times a week, but need a home health aide to help with bathing and dressing every day.  Because the cost of services differs widely, having more flexibility built in the policy benefits the policyholder.           

When the indemnity method is used, you receive a set dollar amount.  Specific services are not important; you just have to be eligible for benefits. The insurance company pays the policyholder directly at the maximum daily rate.  Some long-term care policies use a disability income model so that the money you receive each month can be spent on whatever services you need and you have the freedom to hire caregivers you choose.  The increased flexibility is more expensive. 

A benefit period is the limit of total benefits that will be paid out once you make a claim.  Sometimes, the benefit period will be stated in length of time (i.e. 2 years, 3 years, 4 years, or even lifetime).  Other policies will mention the maximum total benefit in a specific dollar amount.  In most states, the minimum amount of benefit is one year. 

You can choose the number of years that the policy will cover your long-term care needs. Typically, they can choose from 2 years, 3 years, 4 years, 5 years, 6 years, or lifetime care.  It is recommended that you have a minimum of a 3-year policy. The average length of stay in a nursing home is about three years, however, keep in mind that most people will receive care in their home for at least two years before nursing home placement is required. Therefore, it might be more beneficial for you to have a five or six year plan.  

IF you have a family history of Alzheimer’s disease, Parkinson’s disease, Multiple Sclerosis, Lou Gehrig’s Disease (ALS), or other long-term disease processes, it is recommended that you choose lifetime care. 

Most policies today pay the policyholder out of a “pool” of money. For example, if you choose a 4-year plan at $100/day, they have a pool of money that equals: $146,000.  If the client only uses $50/day for some length of time, the other half ($50) remains in their pool of money. This means that a 4-year plan could essentially last longer than four years.  

Therefore, if you have been on claim for four years, yet you still have $30,000 left in their pool of money, you can stay on claim with benefits paid at their maximum daily benefit until that $30,000 has been exhausted.  Benefits will be paid as long as it is certified by a health care professional that you will continue to need care.