A:

An insurance benefit is the amount of money paid to or on behalf of the policyholder. Depending on what kind of insurance policy the policyholder signs up for, the payments are made directly to the insured or on behalf of the insured to a service provider – as long as the service is covered under the policy. Insurance benefits can be made daily, weekly or monthly.

Daily benefit amount (DBA) refers to the maximum amount most long-term care (LTC) policies are willing to pay for each day of care. Insurance companies usually pay the lesser of the daily cost of care or the daily benefit amount. For example, if the DBA for your policy is $150 a day and the actual cost of care for a day is $250, the company will pay $150. Therefore, if the cost of care is greater than the daily benefit amount, then the policyholder has to pay the difference out of pocket. The higher the daily benefit amount, the more expensive the policy will be. In other words, choosing a policy that has a daily benefit amount is more likely to result in higher premiums.

On the other hand, with a monthly benefit, the insurance company pays you that amount. For example, if you sign you for a monthly benefit of $2000, much like a daily benefit, the insurance company will provide you with a maximum of $2000 monthly. However, a monthly benefit is less likely to increase your premium than a daily benefit package. Therefore, it is more convenient and potentially cheaper for a policyholder to receive a monthly benefit rather than a daily benefit.

To learn more, see A New Approach To Long-Term Care Insurance.

This question was answered by Chizoba Morah.

RELATED FAQS
  1. How can I invest in a mutually owned insurance company?

    Read about the difference between mutual and stock insurance companies, including how to become a de facto investor of a ... Read Answer >>
  2. Can your insurance company cancel your policy without notice?

    Learn about your rights as an insured when it comes to your insurance policy being canceled, including how to access your ... Read Answer >>
  3. What is the average return on total revenue for the insurance sector?

    Learn about the three main segments of the insurance industry, and find out what the average return on revenues is for the ... Read Answer >>
  4. Can my insurance company refuse me coverage?

    Insurance isn't always as straightforward as other products. Insurers can deny coverage in many different instances:Non-Renewal ... Read Answer >>
Related Articles
  1. Financial Advisor

    How Linked Benefit Insurance Policies Work

    Linked benefit policies can be a viable alternative to traditional long-term care insurance. Here's how they work.
  2. Insurance

    Dividend-Paying Whole Life Insurance: What to Know

    Many whole life insurance policies pay dividends. Here are what policyholders need to consider.
  3. Financial Advisor

    Taking The Surprise Out Of Long-Term Care

    Don't be caught unprepared - find out what to look for in LTC insurance policies.
  4. Financial Advisor

    Mutual Vs. Publically Traded Insurance Companies

    Should you buy your insurance policy from a mutual or publically traded insurance company?
  5. Insurance

    The Good News About Long-Term Care

    Two options have emerged that allow long-term care policyholders to gain control over premium increases.
  6. Insurance

    How to Protect Your Income No Matter What

    What does it mean to insure your income? Here are a variety of ways to do it and some insights into when it might make sense to invest in income insurance.
RELATED TERMS
  1. Insurance Premium

    The amount of money that an individual or business must pay for ...
  2. Experience Refund

    The portion of an insurance company’s premiums or profits that ...
  3. Experience Rating Insurance

    The amount of loss that an insured party experiences compared ...
  4. Assessable Policy

    A type of insurance policy that may require the policyholder ...
  5. Yearly Renewable Group Term Insurance

    A type of insurance policy purchased by employers to cover several ...
  6. Insurance Inflation Protection

    Insurance inflation protection is designed to allow policyholders ...
Hot Definitions
  1. Taxable Income

    Taxable income is described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments ...
  2. Chartered Financial Analyst - CFA

    A professional designation given by the CFA Institute (formerly AIMR) that measures the competence and integrity of financial ...
  3. Initial Coin Offering (ICO)

    An Initial Coin Offering (ICO) is an unregulated means by which funds are raised for a new cryptocurrency venture.
  4. The Bernie Madoff Story

    Bernie Madoff ran a multibillion-dollar Ponzi scheme that is considered the largest financial fraud of all time.
  5. Pyramid Scheme

    An illegal investment scam based on a hierarchical setup. New recruits make up the base of the pyramid and provide the funding, ...
  6. Ponzi Scheme

    A fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns ...
Trading Center