The Federal Long term Care Insurance Program lets you choose between two inflation protection options.
The automatic compound inflation option (ACIO) means your daily benefit amount and the remaining portion of your maximum lifetime benefit will automatically increase by 3% every year with no increase in your premium. The benefit increases continue even if you are eligible for benefits.
The initial premiums are higher than the future purchase option because you are pre-funding automatic future benefit increases that are designed to help keep pace with inflation. To compare options and premiums for different plans, use the premium calculator at www.ltcfeds.com.
With the future purchase option (FPO), you may buy additional coverage without proof of good health. Every two years, your daily benefit amount and the remaining portion of your maximum lifetime benefit will increase based on the change in the U.S. Department of Labor’s Consumer Price Index for All Urban Consumers. Your premium will also increase unless you decline the offer.
If you accept the FPO increase, the additional coverage will be based on your age and the current premium rate at the time the increase takes effect. Every two years, you will receive the FPO offer provided you are not eligible for benefits and have not declined the FPO increase three times. If you decline a total of three FPO offers, you must provide evidence of your good health by completing a full underwriting application in order to receive future FPO offers.
You can change to the ACIO at any time if you provide evidence of insurability (meaning you will be required to provide, at your expense, evidence of good health.