When you purchase a long-term care insurance (LTCI) policy, you’re planning for a future need that could be years or even decades away. But as the cost of care continues to rise over time, a policy that seems sufficient today might fall short tomorrow. That’s where inflation protection comes in.

Inflation protection helps your long-term care benefits grow over time, so your coverage keeps pace with the rising cost of care. It’s one of the most important features to consider, especially if you’re purchasing a policy at a younger age.

Why You Need Inflation Protection

Long-term care is expensive, and it continues to get more expensive every year. Whether you’re planning to receive care at home, in an assisted living facility, or in a nursing home, costs are likely to increase with inflation.

Without inflation protection, your policy’s benefit amount stays the same while the cost of care rises. This could leave you with a significant gap between what your policy pays and what care actually costs when you need it.

Types of Inflation Protection Options

Long-term care insurance policies may offer one or more of the following inflation protection riders. Choosing the right one depends on your age, budget, and how far into the future you expect to need care.

3% Compound Inflation Protection

This option increases your benefit amount by 3% each year, compounded annually. That means the increase is applied to the previous year’s benefit, leading to more growth over time.

• A popular choice for those in their 50s and 60s
• Helps your benefits grow significantly over 20+ years

5% Compound Inflation Protection

This rider increases your benefit by 5% compounded annually. It provides even stronger growth but usually comes with a higher premium.

• Often chosen by younger buyers who likely won’t need care for decades
• Offers the most robust protection against future care costs

Simple Inflation Protection

Instead of compounding, this option increases your benefit by a fixed percentage of the original amount each year (e.g., 3% or 5%).

• Premiums are typically lower than compound options
• Still provides meaningful growth, but not as aggressive over the long term

Future Purchase Option (FPO)

With this feature, you have the right to increase your coverage periodically without providing additional health information. Increases are based on your age and current benefit level at the time of the offer.

• Premiums start lower than automatic inflation protection
• Increases are optional, but skipping them may limit future opportunities

Which Inflation Option Is Right for You?

The best choice depends on a few key factors:

• Your age: The younger you are when you buy, the more inflation protection matters.
• Your health: Health conditions can impact whether you’re eligible for certain riders.
• Your budget: Inflation protection adds cost to a policy, but it may save you more later.
• Your timeline: If you don’t expect to need care for 20+ years, compounding may be essential.

Working with a long-term care insurance specialist can help you evaluate these options based on your goals and financial picture.

Interested in learning more about inflation protection?

Choosing the right LTCI policy features, including inflation protection, can feel overwhelming. That’s why we connect you with trusted LTC Advocates who specialize in simplifying this process. They’ll help you understand your options and make a confident decision about your future care. Speak with an LTC Advocate today to start exploring your LTCI policy options.