This blog post is designed to provide general information on the subjects covered. It is not, however, intended to provide specific estate planning, insurance, tax or legal advice. Please note that LTC Consumer and its representatives do not give financial planning, tax or legal advice. You are encouraged to consult with your tax advisor or attorney concerning your own situation.

What’s Better: A Daily Benefit or a Monthly Benefit?

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When buying a Long Term Care insurance policy, there’s no one-size-fits-all plan. Coverage can be customized to fit your needs and budget. When shopping for coverage, it’s important to understand the difference between a daily and a monthly benefit. This feature can determine how much money is paid out in a claim.

A daily benefit is the maximum amount a policy will reimburse you for each day you receive care services.

A monthly benefit is the maximum amount you have available to you each month for care services.

What’s the Difference?

Let’s look at two people with similar long term care policies and how they pay out differently.

Daily vs. Monthly Benefit

Mary

James

 

Mary owns a long term care policy with a $100 daily benefit.

 

James owns a long term care policy with a $3,000 monthly benefit.

 

These policies may appear similar, but the way benefits are paid can be very different. When many people need long term care services, they prefer to stay in their homes rather than go to a facility. If Mary and James both receive the same home care services three days a week for a month, Mary will pay more out-of-pocket while James will pay nothing.

While both policies pay $3,000 per month in benefits, how benefits are paid is different. Here’s how it works:

Cost of Home Care Services Mary’s Policy

$100 Daily Benefit

James’ Policy

$3,000 Monthly Benefit

Monday: $100 Policy paid:

$100

Mary’s cost:

$0

Policy paid:

$100

James’ cost:

$0

Wednesday: $150 Policy paid:

$100

Mary’s cost:

$50

Policy paid:

$150

James’ cost:

$0

Friday: $250 Policy paid:

$100

Mary’s cost:

$150

Policy paid:

$250

James’ cost:

$0

Monthly Total

(3 days of service/week for 4 weeks)

Policy total:

$1,200

Mary’s total cost:

$800

Policy total:

$2,000

James’ total cost:

$0

 
Mary’s policy has a daily benefit meaning the policy will only pay up to the maximum amount allowed each day. If Mary needs services above the daily benefit limit, she is responsible for paying for those services out-of-pocket.

James’ policy has a monthly benefit allowing the policy to pay for the actual cost of services each day up to the monthly maximum. The cost of care each day doesn’t matter. He will receive the entire amount up to the monthly maximum. James has no out-of-pocket costs and his policy pays more in benefits.

Important Considerations When Choosing a Plan

As you can see from the examples, a monthly benefit offers more flexibility to manage long term care expenses. If your need for care services fluctuates day to day, your policy will still pay up to the monthly maximum. When deciding which plan is right for you, consider how the policy benefits will pay. Select a policy that works the way you want and need it to when you make a claim.

At LTC Consumer, our LTC Specialists help you decide which benefit features are right for you. Get an LTCI quote to learn more about LTC coverage options.

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