Twenty years ago you could buy a first class stamp for 29 cents and fill your gas tank for $1.11 a gallon. Today a stamp is 49 cents and a gallon of gas here in CA is close to $4.00. What these things will cost 20 years from now is anyone’s guess. The only certainty is that prices will continue to rise. This is especially true when we look at the costs of long-term care services such as home care and nursing facilities.
Historically, the cost of long-term care services has increased approximately 5% per year. That trend is expected to continue. So, how do people who purchase a long-term care policy today ensure they will have enough coverage 20 years down the road when they will likely need the care? The answer is inflation protection.
Adding an inflation rider allows the policy benefits to increase annually to help keep pace with the rising cost of services. This rider is must on any long-term care policy that you write. The problem for most is that the rider is very costly. For this reason we suggest a thorough examination of the different riders.
We have found that the cost for the 5% inflation rider is the most expensive. In many cases we have found it is less expensive to buy more monthly benefit now with a lower inflation rider (say 3%) to accomplish the same objective. The objective is to create a pool of money for when you need it. If you need it in 20 years we can get their with either rider, the 5% or the 3%, but analyzing the cost of buying more benefit with a lower rider is a smart move.
Call us to do this work for you…because in the LTC world…nothing stays the same.