Inflation Protection
An inflation protection is one of the most important options to have
in a long term care insurance policy. Inflation protection benefit
increases the daily benefit amount over time to keep pace with inflation
and the increased cost of expenses.
Although you are not required to purchase inflation protection,
it is an important protection for younger people who might not need
long term care for many years. Inflation protection will increase
the premium on a long term care insurance policy. With the continual
increase in the costs of long term care services, it would be wise to
consider the protection offered by this benefit. A long term care
insurance policy without an inflation protection may be of little value
10 to 20 years from the time of purchase.
A Long Term Care Insurance Policy Without Inflation Protection
Without an inflation protection benefit in your long term care insurance
policy, you may be put in a situation in which the insurance benefits are
only paying for a small portion of the actual costs of your future long
term care expenses. Without inflation protection, your long term
care insurance will only pay expenses based on today’s costs.
If the policy is used 10 or 20 years from now, you would be required
to pay the difference between what the insurance pays and the actual
cost of care.
Raising Costs of Long Term Care Facilities and Services
Also consider that costs have raised rapidly in long term care
services in most states – such as nursing home facilities,
assisted living programs, and in-home care. Long term care costs
and health care costs continue to rise at a rate much faster than
inflation in things such as food or clothing. A nursing home
that costs $110 a day will cost $292 a day in 20 years with 5% inflation
per year. For the past several years, the cost of nursing home care
has been rising at an annual rate of 8%.
Two Ways to Purchase Inflation Protection
Inflation protection is offered in two ways: automatically or by
special offer.
Long term care insurance policies using automatic increase of benefits
for inflation use either simple or compound rates. The daily benefit
increases using a fixed percentage for either the life of the policy
or for a fixed period of usually 10 or 20 years.
With “simple” inflation adjustment, the benefit increases
by the same dollar amount each year. A $100 daily benefit increasing
5% per year will go up $5/day per year and be $200 a day in 20 years.
With “compound” inflation adjustment, the benefit increases
by a higher dollar amount each year. A $100 daily benefit will be
$265 a day in 20 years. Compound automatic inflation increase can
make a big difference in the amount of benefit you can receive over
the years.
Special offer inflation protection is usually offered to you by
the long term care insurance company every three years with an existing
policy. If you turn down the option to increase your benefit, you
may not be offered the option again. With a periodic increase in
benefits, your premium will also increase.
Obtain Long Term Care Insurance Quotes with Inflation Protection
To get an idea of what your long term care insurance rates with an inflation
protection option will be, you can get free online long
term care insurance quotes. |
