Why would you want a monthly benefit versus a daily benefit?

By Chizoba Morah AAA
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. What's the difference between Social Security Disability Insurance (SSDI) and Supplemental ...

    Both Social Security Disability Insurance and Supplemental Security Income are administered by the Social Security Administration, ...
  2. On average, what can I expect my private mortgage insurance (PMI) rate to be?

    Learn the several factors that come into play when insurance companies determine the private mortgage insurance rate for ...
  3. Why do I need to pay private mortgage insurance (PMI)?

    The extra interest payments caused by private mortgage insurance may seem excessive, but there's a good reason lenders need ...
  4. What's the difference between binary options and day trading?

    Binary options and day trading are both ways to make (or lose) money in the financial markets, but they are different animals. ...
RELATED TERMS
  1. Lloyd's Of London

    A British insurance market where members join hands as syndicates ...
  2. Reinsurer

    A company that provides financial protection to insurance companies. ...
  3. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all ...
  4. Death Master File (DMF)

    Also known as Social Security Death Index. A list of people whose ...
  5. Level Death Benefit

    A life insurance payout that is the same whether the insured ...
  6. HIPAA Waiver of Authorization

    A legal document that allows an individual’s health information ...
comments powered by Disqus
Related Articles
  1. Why You Don’t Need Mortgage Protection ...
    Insurance

    Why You Don’t Need Mortgage Protection ...

  2. Health Insurance Tips For College Students
    Insurance

    Health Insurance Tips For College Students

  3. Don't Be Misled By Investment Advertising
    Home & Auto

    Don't Be Misled By Investment Advertising

  4. Health Insurance: Paying For Pre-Existing ...
    Home & Auto

    Health Insurance: Paying For Pre-Existing ...

  5. 5 Services To Usher In New Clients
    Professionals

    5 Services To Usher In New Clients

Trading Center