Moving parts of a long-term care plan
By Mark Terry • Bankrate.com

The components of a long-term health insurance plan will depend on your health, age and the type of benefits you're interested in receiving. The costs, as a result, can vary quite a bit, as is the case with life insurance.

For instance, the elimination period can vary, which like a deductible, would affect the cost of the premium. "There's also the period of time that the benefit will continue -- it could be anywhere from two years to a lifetime," says Joshua Barron, J.D., of JMB Financial Services Group LLC, in Troy, Mich.

Anybody interested in long-term care insurance plans should consider inflation protection. Some policies have it, and some don't.

"What you really want to have is compound-inflation protection because that's a true measure of what it's going to cost," says Barron.

Randolph J. Shine with Shine Financial Inc., in Deerfield Beach, Fla., says currently, long-term care benefits are paid out in one of three ways.

1. Traditional pool system. A particular daily benefit is purchased. For example, the policy agrees to pay $100 per day. In a single year, you have $36,500 of benefits available to you in a pool. If less than $100 is used in one day, and on another day you use $50, that unused $50 stays in the pool. Technically, you end up with longer than five years of service if you didn't consume up to the daily rate. This system is the most common and requires that the recipient or caregiver provide regular receipts for reimbursement. It is essentially, within the amount of coverage purchased, a pay-for-services policy.

2. The indemnity policy. This policy pays a flat fee per day regardless of the bill. For instance, if you purchase $100 of coverage per day, that's the amount that will be paid out, even if that day's services cost $50 or if the services cost $200 per day. The advantage is you always know the amount that will be disbursed. The disadvantage is it might not cover your expenses.

Weekly/monthly. Rather than paying out a daily rate, the idemnity policy pays out a weekly or monthly rate -- for instance, $700 per week or $3,000 per month, regardless of the cost of services. Weekly or monthly policies are the most common.

3. Cash policy. This is similar to disability insurance. The insurance company agrees to pay you a monthly benefit, for instance, $4,500, and it doesn't matter what the actual amount of the bills are. You receive a check for that amount. So, if you have $2,000 of care costs, you still receive the $4,500, and you can spend it on whatever you want.