Long Term Care Insurance Inflation Protection Rider
When it comes to inflation riders, there are four main choices. There are common choices for different age groups. Read more to find out what option will work best for your long term care insurance policy.
No Inflation Protection
The first choice would be to not buy inflation protection and just purchase as much daily benefit as you can possibly afford. This option is almost always for the much older buyer. If you are 80 or older, this is what we would suggest.
Guarantee Purchase Option
Second choice is something called the guarantee purchase option (GPO), sometimes called COLI or future purchase. This is either built in at no cost up front, or adds a minimal charge (about 2% or so). With this option, offers will be made every two to three years depending on the contract to increase the daily benefit with no additional underwriting. The downside to this option is that the cost of each increase chosen is based on the new age of the insured. Also, many of the policies will stop the offer you if have rejected it two or more times or have been on claim. GPO is a very good choice for people in their 70s.
The third option is called simple inflation. This usually adds between 40% and 60% to the premium. Simple inflation increases the original daily benefit by 5% every year automatically. This will double the daily benefit in 19 and a half years. It is usually best for people in their 60s.
The last, and most would say best option, is compound inflation. This can double your premium but is well worth it. Compound inflation typically adds 5% to the daily benefit and is compounded annually so the daily benefit doubles in 14 and a half years. Sometimes we see compound inflation options at 3%, 4% or even linked to the Consumer Price Index. Anyone under 60 years old should seriously consider the compound option.
The age examples given are exactly that, examples. This is another option where it really depends on health, finances and family history. Please talk to a Long Term Care insurance specialist who can help you choose the best riders for you.
Optional Riders/Built in Features/Exclusions
Survivorship, shared care, restoration of benefits, return of premium, joint waiver, extra cash and limited pay options are all additional riders offered in current Long Term Care insurance plans. Many of these riders are extremely attractive to the buyer, but not overly necessary. There are many variations of each and they can cost anywhere from 2% to 65% depending on the rider. The important point to note is that more than ever before, the marketplace is full of options and flexibility. There is truly something for everyone.
However, the utilization of a Long Term Care insurance specialist has become more important than ever. A specialist can also help you sort through other differences in contract language such as policy exclusions. When you get a free quote from us, you will be contacted by a specialist in your area to go over all of the options available to you.