Long term care insurance policies may need extra inflation coverage

Long Term Care Insurance Planning

Many experts are starting to recommend that added protection be purchased to ensure the coverage will be adequate.

Long Term Care Insurance PlanningAlthough it may sound a little bit strange to hear that experts are recommending extra coverage for a long term care insurance policy, but that is exactly what is happening on an increasing basis in order to protect policyholders against inflation.

Without that additional protection, some are starting to question the value of this type of policy in the first place.

The executive director of the American Association for Long Term Care Insurance, Jesse Slome, recently discussed the topic and disagreed with the claims that were made that stated that the value of this type of coverage may no longer be enough to make its expense worthwhile. However, it is starting to become clear that as a result of the length of time that a policy is typically maintained before claims might start having to be made, inflation could start to play a role on the size of the coverage that is available to policyholders who make claims.

The reason is that long term care insurance is typically purchased decades before significant claims are made.

The age of the average policyholder is from early fifties to late sixties. However, at the same time, the average person with long term care coverage doesn’t usually need substantial daily living assistance until he or she is notably older – usually at some point in the eighties. This doesn’t seem like much of an issue until it is considered that the cost of services and supports – whether living in a nursing home, at home, or elsewhere – will continue rising from one year to the next. After twenty or thirty years have gone by, the difference is considerable and the issue may not be noticed until it’s too late as no benefits had been collected throughout that time.

For that reason, what looks as though it would be a promising benefit at the time that the long term care insurance policy is purchased could be worth a considerable amount less once it comes time for a claim to be made.

2 Thoughts to “Long term care insurance policies may need extra inflation coverage”

  1. Having a cost of living rider on a long term care plan is of value.

    What is does is add to the pool of money an insured will have in their plan when care giving services are needed.

    It used to be 5% was standard and the rider was not expensive. With the current financial markets, 5% coverage is expensive. The carriers have been creative with offering various levels of cost of living coverage which is less then 3% but can offer sufficient coverage for care giving needs.

    How much and for how long depends on the age of people when they own a plan. 50’s and younger, more inflation coverage or there are ways to design a plan where benefits will be sufficient 20, 25, or 30 years in the future.

    In your 60’s and 70’s different levels of inflation maybe recommended as the time where you may need coverage is sooner.

    This is where a knowledgeable and competent agent helps financial advisors, wealth managers, accountants, and attorneys.

    Anyone can offer an LTC plan which is of value to the client. Why? Companies offer different plans to provide benefits in ways people have not considered. Some are all cash, combination — money or reimbursement, and other plans are all reimbursement.

    Before any of this is considered — a person and their family needs to come to terms that these plans fund what has been planned for their life style while working and in retirement.

    You own a vehicle to drive to places. It is gasoline and maintenance which allows the vehicle to get you to where you want to go. That is what an extended care plan provices.

  2. Nicole Young

    Inflation protection is indeed advisable and beneficial, you have the advantage of increasing your benefit amount that lets you cope with the increasing cost of care as well. Although it may pose additional spending, infolongtermcare.org/long-term-care-insurance-information/
    suggested getting compound inflation protection so you can you can afford long-term care services even if they get more expensive. After all, with an inflation protection rider, your benefit increases without affecting your premiums yearly.

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