The LTCI Inflation Debate

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The LTCI Inflation Debate 3% vs. 5% Compound Inflation Protection The inflation protection option you choose when purchasing a Long-Term Care Insurance (LTCI) policy is the most important component of your purchase. For the average-aged buyer (age 57), the inflation protection is the bulk of the policy’s value. (It is not the policy’s daily benefit at the time of purchase that is of most significance. Rather, it is the future inflated daily benefit when the policyholder is 80-90+ that is critical, since the odds of using the policy for physical or cognitive frailty is exponentially greater in older age.) Your inflation choice is worthy of thoughtful consideration due to the magnitude of its impact on your purchase’s future value.

Deciding which inflationary guard to choose with your Long-Term Care Insurance policy design can be confusing. Today’s policies have many inflationary choices. However, the most common are 3% and 5% compound (level premium) inflation. (NOTE: Some carriers also offer choices based on the national CPI [Consumer Price Index] as an alternative to a 3% compound inflation option. Historically the CPI has averaged approximately 3% [1982-2014].) In order to understand the impact of these inflationary guards, one should understand inflationary trends in the context of an evolving Long-Term Caregiving industry.


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