For buyers of long-term care insurance, it pays to act now rather than wait. As you grow older, your health may decline and you might find this coverage very expensive–or not available at any price. At age 65, about 30% of all applicants for long-term care insurance are rejected. At age 75, the rejection rate is nearly 50%.
Assuming you qualify for this coverage at a reasonable price, you probably will be offered several inflation options, including:
* 5% compound. If you buy a policy with a $100-per-day benefit, it will increase by 5% every year, compounded. After 14 years, you benefit will be nearly $200 a day, if you need long-term care.
* 5% simple. Your benefit will increase each year by 5% of the original amount. If you start with a $100 daily benefit, it will increase by $5 (5%) each year. After 14 years, your daily benefit will be $170.
As you might expect, a simple inflation rider will be less expensive than a compound rider. You might do without any inflation protection at all, to cut costs, but you’ll run the risk that your daily benefit may be much lower than the amount you’ll ultimately need to pay for care.
