Insurance Articles

Long-Term Care insurance and inflation protection helps keep pace with the increased costs of health care services. Simply stated, inflation means that products or services (long-term care services) will cost more in the future than they do today. Some costs rise slowly, some rise faster than others. But, long-term care is expensive now and costs will almost certainly rise in the future.

When you are considering the purchase of long-term care insurance for yourself or a family member, it is extremely important to look closely at how inflation can affect your future. Without inflation protection in your long-term care insurance policy, you may find yourself with benefits that pay only a small portion of the actual costs of your future long-term care.

If the time ever comes when you need care in your home or in a long-term care facility, you need to make sure that the insurance policy will pay most of your expenses. If you purchase a policy without inflation protection and use it 20 years from now, you will need to pay the difference between what the insurance pays, which is based on costs 20 years earlier, and the actual cost of care. That is because the insurance benefits will not have kept up with the rising costs of services.

The built-in inflation protection is included in all State Partnership policies and it increases your benefits by 5% each year. You have the choice inflation protection with all long-term care insurance policies. Including inflation protection reduces the risk that you will have to pay more as long-term care costs increase over the twenty to thirty years that you own the policy. Long-Term Care costs have risen rapidly throughout the United States. Long-term care costs as well as the cost of living varies from State to State. Long-Term care planning includes thinking about where you will be when you will be receiving your benefits.

If you live in an expensive State, but you are planning to retire to a more rural and less expensive State than that should be taken into consideration when designing a plan with a Long-Term Care Specialist.

We don’t know what the costs will be for Long-Term Care in the future. We do know that we are planning today for tomorrow’s costs. When you are buying long-term care insurance, you need to ask yourself these questions:

• How will my benefits look in 10, 15, or even 30 years?
• Will the coverage be adequate to pay for most of the cost of care when it is needed?
• Will you be able to receive your benefits where you want to?

How does annually compounding inflation protection work?

Each year, with 5% inflation protection, the amount of your benefit increases by 5%. The premium you pay does not increase as a result of the increase in benefits. If the original policy was written to cover long-term care services at $200 per day, a 5% adjustment would be added to the policy benefit, bringing the coverage to $210 per day after the first year. At the end of the second year, the policy increases to $220.50 per day. this annual adjustment is repeated each year. Consequently, the overall benefit amount increases throughout the life of the policy to help keep pace with the rising costs of long-term care.

Nobody knows when they are going to need care. The possibility of needing long-term care due to an illness or physical disability is something most people would rather not think about. As we get older, and because we are living longer, the likelihood that we will need some kind of assistance is very real. It is time to stop procrastinating and put a long-term care plan in place even though you may not begin receiving benefits for 20, 30 or in some cases 40 years.

Without inflation protection, the difference between what your policy will pay and the actual cost of each of long-term care is likely to be significant. There are some exceptions that 5% inflation protection not be selected. These options may depend on a person’s age along with the advice of a Long-Term Care Specialist.

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