Call Us 800-223-6756 ☰ ˟
Logo
Call Us 800-223-6756
  • Home
  • Business
    • Property & CasualtyImage of right arrow
      • Management LiabilityImage of right arrow
        • Management Liability Quote
      • Builders Risk Quote
      • Commercial AutoImage of right arrow
        • Commercial Auto Quote
      • General LiabilityImage of right arrow
        • General Liability Quote
      • Workers CompensationImage of right arrow
        • Workers Compensation Quote
      • Marine (Ocean & Inland)Image of right arrow
        • Marine Quote (Ocean & Inland)
      • Bonds & SuretyImage of right arrow
        • Bond Request
    • Industry ExpertiseImage of right arrow
      • Family Entertainment CenterImage of right arrow
        • Family Entertainment Quote
      • Indoor Trampoline ParkImage of right arrow
        • Indoor Trampoline Quote
      • HospitalityImage of right arrow
        • Hospitality Quote
      • Real EstateImage of right arrow
        • Real Estate Quote
      • ConstructionImage of right arrow
        • Construction Quote
    • Risk ManagementImage of right arrow
      • Management LiabilityImage of right arrow
        • Management Liability Quote
      • Builders Risk Quote
      • Commercial AutoImage of right arrow
        • Commercial Auto Quote
      • General LiabilityImage of right arrow
        • General Liability Quote
      • Workers CompensationImage of right arrow
        • Workers Compensation Quote
      • Marine (Ocean & Inland)Image of right arrow
        • Marine Quote (Ocean & Inland)
      • Bonds & SuretyImage of right arrow
        • Bond Request
      • Family Fun CenterImage of right arrow
        • Family Fun Center Quote
      • Indoor Trampoline ParkImage of right arrow
        • Indoor Trampoline Park Quote
      • HospitalityImage of right arrow
        • Hospitality Quote
      • Real EstateImage of right arrow
        • Real Estate Quote
      • ConstructionImage of right arrow
        • Construction Quote
  • Personal
    • High Net WorthImage of right arrow
      • High Net Worth Quote
    • AutomobileImage of right arrow
      • Auto Quote
    • HomeownersImage of right arrow
      • Homeowners Quote
    • CondominiumImage of right arrow
      • Condo Quote
    • RentersImage of right arrow
      • Renters Quote
    • WatercraftImage of right arrow
      • Watercraft Quote
    • LifeImage of right arrow
      • Life Quote
  • Resources
    • Secure File Area
    • Refer a Friend
    • Important Links
    • Insurance Glossary
    • Blog
  • About
    • About Us
    • Our Locations
    • Testimonials
    • Privacy Policy
  • Contact
Home > Blog > Should You Buy Inflation Protection For Long-Term Care Insurance?
FRIDAY, FEBRUARY 5, 2016

Should You Buy Inflation Protection For Long-Term Care Insurance?

Should you buy inflation protection for long-term care insurance? Absolutely. In fact, if you don’t think you can afford that extra coverage, you should probably rethink whether you should buy the insurance at all.

The issue of inflation protection was just one of the subjects that I, along with financial adviser Michael Kitces and insurance industry spokesman Jesse Slome, discussed on a Wall Street Journal webcast on Monday. The Journal’s Anne Tergesen wrote a nice article this week that also touched on the inflation issue.

There is a reasonable debate about how much additional coverage you should buy, but there is no doubt that nearly everyone should buy some. Here are just some reasons why:

Typically, buyers of long-term care insurance are in their 50s or early 60s. But you probably won’t need substantial help with daily living until you are in your 80s. That means the cost of long-term services and supports—whether you receive care at home, in a nursing home, or in some other setting–will rise year after year for thirty years before you ever collect benefits.

As a result, what looks like a pretty good benefit today will be worth far less when you eventually make a claim.

How much less? Say you buy a three year policy that promises to pay $150-a-day (a bit more generous than a typical policy). Today, according to the latest survey of long-term care costs by ltc insurer Genworth, a private room in a nursing home averages $240-a-day, or nearly $88,000-a-year. Your $150-a-day policy would cover 58 percent of the cost and you’ll pick up the additional $90 out of savings or retirement income.

That might be manageable. But if inflation averages 3 percent a year (the long-term average for the overall economy), in 30 years the purchasing power of that $150 will shrink to less than $62. Or to put it another way, that $240 daily cost of a nursing home bed would increase to $582. However you prefer to think about it, your insurance would cover only about one-quarter of your daily costs instead of nearly 60 percent.

It is true that inflation will also increase the size of your nest egg (in nominal dollars), but will you have the resources to pick up the difference?

Of course, there is no way to predict increases in long-term care costs over the next 30 years. The Genworth study and others like it provide some useful information but also can be misleading.

Here’s one problem: Genworth reports that the median cost for that private nursing home room increased by an annual average of 4.19 percent over the past five years. But that was a period when we were slowly climbing out of the worst recession since the 1920s and many measures of inflation, including labor costs, remained stagnant. Thus, I’d be very careful about using the last five years to predict the next 30.

Read More: Source

Posted 9:00 AM

Tags: life, long-term care, insurance
Share |


No Comments


Post a Comment
Required
Required (Not Displayed)
Required


All comments are moderated and stripped of HTML.

NOTICE: This blog and website are made available by the publisher for educational and informational purposes only. It is not be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state. By using this blog site you understand that there is no broker client relationship between you and the blog and website publisher.
Blog Archive
  • 2022
  • 2021
  • 2017
  • 2016
  • 2015
  • 2014
  • 2013
  • 2012
  • 2011

  • insurance(98)
  • tips(37)
  • home(28)
  • life(24)
  • homeowner(19)
  • auto(17)
  • safety(13)
  • car(10)
  • claims(10)
  • homeowners(9)
  • business(8)
  • holiday(7)
  • wateridge insurance services(7)
  • policy(6)
  • liability(6)
  • house(6)
  • commercial(5)
  • family(5)
  • health(5)
  • cyber security(4)
  • earthquake insurance(4)
  • homeowners insurance(4)
  • rates(4)
  • flood insurance(4)
  • summer(3)
  • water damage(3)
  • claim(3)
  • long-term(3)
  • valentine(3)
  • halloween(3)
  • san diego(3)
  • theft(3)
  • money(3)
  • commercial insurance(3)
  • flood(3)
  • independent agent(3)
  • mistakes(3)
  • risk management(3)
  • disability(2)
  • real estate(2)
  • cyber risk(2)
  • millennials(2)
  • business owners policy(2)
  • auto insurance(2)
  • thanksgiving(2)
  • coverage(2)
  • pets(2)
  • wateridge(2)
  • save(2)
  • funny(2)

View Mobile Version
Carrier
Carrier
Carrier
Carrier
Carrier
Carrier
Carrier
Carrier
Carrier
Carrier
Home| Get A Quote| Blog| About Us| Contact
10717 Sorrento Valley Rd. | San Diego, CA 92121
Toll Free: 800-223-6756 | Local: 858-452-2200
Social Social Social Social Social
Logo

Powered by Insurance Website Builder