Medical inflation is a fact of life!  If history is our guide, we can expect the cost of convalescent care at a Nursing Home, an Assisted Living Apartment, or from a Home Health Care agency (for care in your own home) to continue to rise yearly.  In the past decade, medical inflation has risen faster than inflation in the general economy. While we can't prevent the rising cost of care, we can make sure that our Long Term Care insurance (LTCi) plan includes an inflation benefit. 

Failing to purchase inflation protection is the worst mistake made by some consumers when purchasing LTCi, because eventually their daily benefit becomes too small against the high cost of care, and they are left with huge bills to pay out-of-pocket.

Today's modern LTCi plans have several inflation options available:

• 5% Compounded For Life:  Premiums are projected to remain level.  Your LTCi Daily Benefit is increased each year by 5% more than the previous year.  This is the top level of guaranteed inflation protection; best choice for younger ages up to ages 70+.

• 5% Simple for Life:  Premiums are projected to remain level.  Your LTCi Daily Benefit is increased each year by 5% more than the original amount.  This is the moderate level of guaranteed inflation protection; very good choice for older ages from late 60's to late 70's. 

• CPI (Consumer Price Indexed) for Life: Premiums are projected to remain level.  Your LTCi Daily Benefit is increased each year by the CPI amount for that year.  This is a top level of guaranteed inflation protection; very good choice for younger ages to late 70's.

• CPI (Consumer Price Indexed) Offer or Periodic Offer:  Premiums will increase each year you accept an inflation offer.  Your LTCi Daily Benefit increases by an amount based on the CPI or some other index, but the premium charges are based on your new older age each time.  Generally, the insurer only offers the increase every 2 or 3 years, and usually if you fail to accept 2 increases, you lose the option of further increases.  This choice initially seems cheaper, but becomes the most expensive inflation option over the years; certainly not a good choice for younger ages.

• Other Variations:  A few LTCi companies also offer some additional variations for inflation protection based on the models above.  These variations typically take the form of limiting the inflation growth to two times the original benefit (rather than receiving greater benefits for as long as you live),  or using a smaller than 5% benfit increase yearly.