Don't Purchase Long-Term Care Insurance Without Inflation Protection!

The demand for long-term care services - due to baby boomers moving into their 70's and 80's - will undoubtedly result in higher long-term costs in the future. An inflation protection benefit added to your LTC insurance coverage will help hedge against these rising costs.

While it is possible to purchase LTC insurance without it, we stongly recommend that some type of protection be included in the design of every LTC insurance plan. Inflation will always be with us, with a high probability that the inflation rate for long-term care services will be higher over time than the overall economic inflation rate.

The inflation protection benefit automatically raises the benefit amount of your policy each year. Without having to think about it, or pay an increasingly higher premium each year, the benefit helps to ensure that the original objectives of your LTC Plan continue to be met.

These benefits normally offer a 5% simple or 5% compound inflation benefit. While the compound benefit is more expensive, it's normally the best choice since it is more realistically tied to probable inflation rates. The compound inflation benefit will double the benefits of your policy every 14 years. If you purchase the simple inflation benefit, the benefits will double every 20 years.

Specifically, we recommend the following:

Even with the purchase of the inflation protection benefit, it's imperative to monitor the rising cost of care in your area to make sure your plan is meeting your objectives. An annual review of coverage by your LTC Planning and Insurance expert should include a comparison of the new current costs of care with your latest inflation-adjusted benefits.

·  Everyone who purchases coverage at age 70 and under should purchase the compound inflation benefit.

·  If you are purchasing coverage between ages 71 and 75, ad the compound benefit adds too much to the premium, consider the simple inflation rider.

·  If you are purchasing coverage after age 75, and both the compound and the simple inflation protection benefit riders are too expensive, consider increasing your benefit amount to act as a cushion against inflation. It may be more practical at these ages to purchase an additional 25% in benefit amount, for example, rather than an actual inflation protection benefit. The additional coverage acts as your protection against inflation.

Your LTC Planning and Insurance expert can guide you in this decision.

Chapter 11 of my book, Designing the Right Coverage: A Case Study,  examines the effects of various factors of LTC Insurance, including inflation protection.

Email me at allen@superiorltc.com if you would like a complimentary e-book version.