Increasingly, people are recognizing the need for long term care insurance earlier in life.
Since your clients may purchase a policy 20 to 30 years before they might need to use their benefits, it’s important to consider inflation protection when you design their long term care insurance plan.
Inflation protection riders can help protect your clients’ assets against the rising costs of LTC.
With so many riders available, which one should your clients choose? Which option is the best for a particular client depends on many factors, including their risk tolerance, personal preferences and budget.
3% or 5%?
When it comes to compound inflation protection options, your clients’ choice is often between the 3% or the 5% benefit increase riders.
Historically, the 5% compound inflation protection option was often considered the best choice because it maximizes the potential pool of benefits. However, the cost of long term care is now rising at a lower rate than in the past.
For many years, nursing home and other long term care costs increased at around 7% per year. Currently, the average five-year annual growth of facility care was about 4%. The cost of home care has been increasing at an even slower rate, with average five-year annual growth of just above 1%.
Compared to the 5% compound inflation protection option, the 3% option is less expensive, and the data suggests it may provide adequate inflation protection to keep up with the rising cost of home care.
Know Your Client
Your clients have several alternatives to help protect them from the rising cost of care. A 3% benefit increase rider may be the right option for those clients looking for dependable inflation protection at a lower cost.
Talk to your clients about their priorities, and help them choose the best inflation protection option for them.
We’re here to help you design a plan that is both affordable and the best solution for your clients’ needs – contact your LTCi Sales Rep for guidance.