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.

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