Wednesday, February 29, 2012

Should you Purchase Inflation Protection on your Long-Term Care Insurance Policy

It is a known fact that the cost of things do get more expensive over time, including long-term care services. So it is important that you take into consideration inflation protection if you are thinking about purchasing a long-term care insurance policy. The decisions that you make when you purchase a long-term care insurance will effect how much the policy will cover when you actually need the insurance and nobody can predict what the cost of care will be in 30 years. This information will hopefully help you in making an informed decision on whether to purchase inflation protection and what level of protection.

An inflation protection option will increase the daily benefit as well as the pool of money of a long-term care insurance policy. Inflation protection does come at an extra cost. Here are some of the more common options for inflation protection:

-5% or 3% Compound inflation increases - This will increase the daily benefit as well as the pool of money by either the 3% o 5% from the previous years daily amount. This will increase the benefits of a LTC Insurance policy over time, 15 years to double for a 5% Compound level.

-5% Simple - This will increase the daily benefit as well as the pool of money by either 3% or 5% from the original daily amount. This will increase the benefits of a LTC Insurance policy as well over time, 20 years it will take to double.

-Consumer Price Index Increase - The daily benefit and pool of money will be recalculated each year based on the CPI, which has been an average of 2.5% from 2003-2009.  This increase will also increase your premiums when opted for the increase.

The cost of care has been increase on an average compound rate of approximately 4.5%.

Generally the 5% compound option is typically a better option for those who will keep their policy for a longer period of time, say under the age of 60 if it is affordable. If it is not affordable then the 3% Compound might be a better choice versus the 5% Simple. After 32 years of a policy being in force, 3% compound will outpace 5% simple.

CPI benefit increases is another option. However, medical costs do not follow the averages of other goods and services. In addition, CPI does fluctuate over time.

Purchasing long-term care insurance is an important decision in planning your future, by making a wise decision now will reduce the risk of your investments being spent on long-term care services.

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  3. I’ve been using this type of Insurance Policy for already 3 years and I’m quite happy that I chose it. Now we can’t predict the way of economic development, so everyone has to think about his own account. According to this I’d like to share my experience in getting loans. If you need to find quickly and not very much money, it’s completely for you. payday loans - a good website that allows you to take quick and safe loan. I hope it'll help you.

  4. Looking ahead is always wise so inflation protection is definitely a good idea. Although the extra cost it incurs is definitely something to consider. Sometimes when I have an added expense I use Focus Financial Corp to help me out.