Long Term Care Insurance inflation protection is a must have

This week I was filling out an application with a husband/wife when we were reviewing the inflation protection option.  They told me about their parent’s (in their 80’s) who purchased a policy years ago with ony $80/day coverage.  I said that should be fine as long as they have inflation protection attached to the policy…which unfortunately is not. 

Inflation protection is one of those “must haves” on almost all properly designed Long Term Care Insurance policies.  A good rule of thumb is to select 5% compound inflation if you are purchasing a policy under the age of 70 years old.  If you are over 70 years old when purchasing your policy then 5% simple interest is fine.

Inflation protection will increase your daily benefit thus increasing the total “pool” available in your policy.  For example, if you purchase $200/day now with 5% compound inflation, then next year you’ll actually have $210/day coverage.  The following year that $210/day will increase by another 5% and so forth.  With the increasing cost of health care and long term care, properly designing a policy today can save you from disappointment 20 years down the road.