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Making decisions about a long term care insurance policy forces
you to think "long-term". If the cost of health care rises
by 5% per year - a very conservative estimate (see
statistics page) - it will double in less than 20 years.
Therefore, it's crucial to buy inflation protection, which
typically is calculated using 5% interest.
Now, you must decide whether to choose Simple or Compound
inflation protection.
Simple Inflation
Each year, the daily benefit amount will increase by 5% based
upon the original daily benefit. $100 per day will
increase in increments of $5.00 each year (100x.05).
Compound Inflation
Each year, the daily benefit amount will increase by 5% based
upon the previous year's benefit. $100 x .05 = $105 first
year, $105 x .05 = $110.25 second year, $105.25 x .05 = $110.51
third year...and so on.
Compound Inflation will cost you more in premium, but will
increase your daily benefit much quicker than simple inflation.
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