Healthcare costs are not immune to inflation. On average, the cost of health care can rise annually anywhere from 4% to 7%. It is important when purchasing long term care insurance to build in protection to your benefits for the daily, weekly or monthly maximum benefits. There are usually three types of inflation protection programs that you can choose from.
Compound Inflation Protection has an automatic increase in benefits that is usually at about 5% annually. There is no corresponding increase in premium though. This option is the most expensive option as it offers the most complete coverage, especially for those that purchase long term care insurance plans before the age of 70.
Simple Inflation Protection also increases annually, but at a much lower rate than Compound Inflation Protection. There is no corresponding increase in premiums in this plan as well. This option is often recommended when an applicant is over the age of 70.
Some long term care plans offer a future purchase option. This option allows consumers to reevaluate their plan at a later date and decided whether or not to buy a greater daily benefit in order to catch up to the most recent costs of care. If the consumer decides to not purchase any additional benefits, their premiums will remain the same, as will their pay out amounts. If the consumer decides to purchase additional daily benefit amounts, their premiums will increase to the new desired level. With this option, the consumer will not need to go through the underwriting process again.
