Long term care insurance is a tricky business. Even trickier is trying to select the right option for you when it comes to inflation protection. Inflation protection is directly tied to the question: Will My Long Term Care Insurance Premium Ever Increase?
What Is Inflation Protection?
It is a fact of life: everyday it gets more expensive to live than the day before. This is especially true when you compare year to year, or even decade to decade. A gallon of milk used to be $1.00 when I was growing up, now it is over $3.50. Bread used to be 3 loaves for $1.00 while today, it's $2.00 for a single loaf of white bread. This very notion that it gets more expensive to live each year impacts the kind of money you will need to survive in the future, which in turn impacts what kind of benefits you'll need or want from your long term insurance policy.
Inflation protection when it comes to long term care insurance is a way to ensure that the benefits that you purchase today with your long term care policy are sufficient to meet your living expenses in the future. Your policy can be set up to ensure that the monthly benefits that you'll be eligible to receive in the future keep track with cost of living increases as you head into the future.
Two Types Of Inflation Protection For Long Term Policies
Inflation protection comes in several types, one that is automatic and one that is offered every three years.
The automatic adjustment option is typically built into your policy from the beginning, thus causing you to have a more expensive monthly premium. However, over time, your premium should remain the same while your benefits go up.
In the case of an adjustment offered to you every three years, you will see the possibility of your premium going up every three years. This could be troublesome if your carrier bases your new premium amount on your new age in addition to the newer higher benefits levels. With this possibility and this option, your premium could be too expensive for you at some point. It is possible that you may have to drop the policy just when you may start to need it most because you can no longer afford paying for it. Make sure you ask about what age the adjustments are made for, how much your premiums will increase over time etc.
Age Is An Important Factor When Considering Inflation Protection
If you are younger when you get your long term care policy and thus "expect" to not need your policy benefits for a long time into the future, inflation protection is more important for you to consider. The reason for this is that the longer you go into the future, the more expensive it will be on a daily basis to live. If your policy benefits don't keep up, you could find yourself with inadequate coverage in the future.
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