Long-Term Care Insurance Inflation Protection:
Why It Is So Important
WHAT IS INFLATION?
Simply stated, inflation means that products or services will cost more in the future than they do today. A loaf of bread once cost a quarter. Today, it is over a dollar. Some costs rise slowly. Some rise faster than others and occasionally some actually decline from year to- year. But, long-term care is expensive now and costs will almost certainly rise in the future.
WHY IS INFLATION PROTECTION SO IMPORTANT FOR LONG-TERM CARE INSURANCE? We hear a lot about inflation. It can get pretty confusing. 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 included in all partnership policies increases your benefits by5% each year to reduce the risk that you will have to pay large, unanticipated expenses from your savings, income or other personal assets.
How much will costs rise for long-term care in the future? Planning Today For Tomorrow's Costs.
By now it must be clear that, when you buy long-term care insurance, you need to ask yourself this question: How will my benefits look 10, 15, or even 30 years from now? Will the coverage you buy today be adequate to pay most of the cost of care when it's needed? Your savings, income or other personal assets must be used to cover any additional costs.
Without inflation protection, the difference between what your policy will pay and the actual cost of each day of long-term care is likely to be significant. For example, let's assume that you buy a $180 per day benefit because you find that nursing home costs are currently about $180 per day in the area where you live. If, during the next 20 years, costs should increase from that $180 per day to $480 per day, you would have to pay the additional $300 per day, or $109,500 per year, from your own resources if your policy did not have inflation protection. It only makes good sense to include inflation protection in every policy you consider.