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Long Term Care Insurance: Inflation Protection is a Critical Factor

The message for you in this article is highlythe  ORIGINAL  benefit  amount  each  year.
important for you to grasp. It is all about
protecting the daily or monthly benefit youFor easy math, if you had a $100 daily
choose at the time of application from thebenefit to start with, the next year your
HUGEimpact  of  future  inflation.benefit would go to $105 per day. The next
year to $110. In 20 years your benefit would
Choosing the correct inflation protectiondouble to $200 per day. Every year the
rider is absolutely critical for anyone underincrease would be JUST $5 more (or 5% of the
the age of 75 when they buy LTC coverage.original  benefit)  than  the  year  before.
Those over 75 should seriously explore
theirinflation  protection  options  too!The best type (for most people under age 72)
of inflation protection to get is called
Why? Because if care costs $150 per day todayCOMPOUND Inflation. This is based on 5% as
where you live, at just 5% inflation, 20well -- BUT it is growing by 5% of the
years from now it will be about $400 per day.LASTyear's  amount.
That is $12,000 per month or $144,000 per
year  --and  the  costs  will  keep  growing.It works just like a bank account, the more
that is in there, the FASTER it grows.
And everyone knows that lifespans in northInstead of the figure of $200 above, having
America continue to rise and the populationcompound inflation would grow to $265 per day
of those aged over 90 is one of the fastestin just 20years. That is a $65 per day or
growing  segments!nearly $2,000 per month difference in your
favor.
If you are 55 now, it may be 30-40 years
before you would go on claim! Just 30 yearsAnd more importantly, every year beyond that
from now, that $150 current cost per day willit grows faster and faster. This is the best
grow to $600 per day ($219,000 each year).way for most people to have a meaningful
In 45years the costs will be nearly $450,000benefit when they go on claim twenty years or
each  year  --  for  EACH  person!!more in the future. For those likely to go on
claim 30 - 50 years from now (you are in your
What if BOTH you and your spouse go on claim?thirties or older now), this is the ONLY
inflation  protection  to  consider.
Now, all of the above figures are based on 5%
inflation. There are two types of costs thatNow some companies have slightly different
over time, have risen faster than mostspins on these basic inflation protections.
others. Those costs are college costs andFor example, a few insurers have a Compound
medicalexpenses! And 5% is a prettyoption as described above, but offer a
reasonable bet over the next few decades. Butcheaperalternative as well. On the cheaper
what  if  medical  cost  rise  even  faster?option the compounding STOPS growing WHEN the
benefit  doubles.
Now back to inflation protection and LTC
policies.I have never recommended this option. There
are better ways to structure a policy which
There are a few different options that onewill cost less in premiums and actually pay
has -- to make the daily or monthly benefitMORE  when  you  go  on  claim.
chosen today, provide real and meaningful
protection when you are LIKELY to go onPlease note that the cost of having inflation
claim.protection is BUILT in to your premium. So
just because your benefits go up every year
The first type of inflation protection is theto protect against inflation, it does NOT
OPTION to buy more daily benefits at givencauseyour  premium  to  go  up  every  year.
intervals (usually every year or every other
year) -- WITHOUT medical questionsWhen one selects Compound inflation, there is
orexaminations. This is the least beneficiala  pretty  cool  thing  that  happens.
for you because you will spend so much more
money  over  the  long  run.NO MATTER how young one is and no matter how
many years of premiums they pay to the
Unfortunately, without the help of aninsurance company, with compound inflation
experienced LTC specialist (such as enrollingthey will get back ALL of the premiums (in
in a group LTC policy at work) this is a hugeterms of benefits) in less than a year of
mistake that MANY people make because in theclaim. That is true if they go on claim in
shortrun,  it  seems  less  expensive.10  years...  or  60  years.
Simply put, as you get older, you can't**** Mark Jeffrey Shopping Tip. It is
afford to buy the bigger increases needed topretty rare that my clients do not see the
pay for the future costs of care since theimportance of Compound inflation protection
increases get bigger... every year you getand choose this option. If budget is an issue
older!
(as it is for most people) I would stick with
So what is cheap in the very short run,a short and fat policy WITH compound
quickly becomes the worst and most expensiveinflation. For more FREE consumer LTC
option! Then you stop buying bigger benefitsshopping  tips  you  can  go  to
and you will lose ground to inflation. Worse
yet, manyyears from now the policy will NOTSince 1997, Mark Jeffrey, a Certifeid
do  the  job  you  bought  it  for.Financial Planner, has helped hundreds plan
ahead for Long Term Care expenses using
The next basic type of inflation protectiondiscounted LTC insurance from the top
is called SIMPLE (or Equal) inflation. Thisinsurers & smart benefit planning strategies.
raises your daily or monthly benefit by 5% of



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