Types of Long Term Care Insurance Policies

Several types of policies are available. Most are known as "indemnity" or "expense incurred" policies.

An indemnity or "per diem" policy pays up to a fixed benefit amount regardless of what you spend. With an expense-incurred policy, you choose the benefit amount when you buy the policy and you are reimbursed for actual expenses for services received up to a fixed dollar amount per day, week, or month.

Today, many companies also offer "integrated policies" or policies with "pooled benefits." This type of policy provides a total dollar amount that may be used for different types of long-term care services. There is usually a daily, weekly, or monthly dollar limit for your covered long-term care expenses.

For example, say you purchase a policy with a maximum benefit amount of $150,000 of pooled benefits. Under this policy you would have a daily benefit of $150 that would last for 1,000 days if you spend the maximum daily amount on care. If, however, your care costs less, you would receive benefits for more than 1,000 days.

There are no policies that guarantee to cover all expenses fully.

You usually have a choice of daily benefit amounts ranging from $50 to more than $300 per day for nursing home coverage. The daily benefit for at-home care may be less than the benefit for nursing home care. It's important to keep in mind that you are responsible for your actual nursing home or home care costs that exceed the daily benefit amount you purchased.

Because the per-day benefit you buy today may not be enough to cover higher costs years from now, most policies offer inflation adjustments. In many policies, for example, the initial benefit amount will increase automatically each year at a specified rate (such as 5 percent) compounded over the life of the policy.

Remember, as with all insurance policies, be sure to examine closely the features and benefits of your policy  to make sure they are the right fit for you.