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There is no one-size fits all when it comes to long term care insurance. To design a Federal Long Term Care Insurance Program (FLTCIP) plan that is best for you, first it's important to understand the cost of care. Then, there are three key decisions you need to make: Choose a daily benefit amountThe daily benefit amount (DBA) is the maximum amount we will pay per day for covered services. The FLTCIP offers $100 to $450 daily benefit amounts in $50 increments. Use the daily cost of care in your area to help select a daily benefit amount. Choose a benefit periodThe benefit period is the length of time benefits will be paid if you receive benefits every day equal to your daily benefit amount. If you receive services that cost less than your daily benefit amount or do not receive services every day, your benefits will last longer. The FLTCIP offers 2, 3, or 5 year benefit periods. As a general guideline, 70% of people over 65 need long term care at some point in their lives and women usually need care longer (3.7 years) than men (2.2 years).1 1 U.S. Department of Health and Human Services, "The Basics," https://longtermcare.acl.gov/the-basics/ (accessed July 2019). Choose an inflation protection optionInflation protection helps your benefits keep pace with inflation and the rising costs of care. If inflation continues to average 2.32%2 every year, in 20 years the average annual cost of care in a nursing home will increase from $100,7403 to $159,372. The FLTCIP offers two types of inflation protection: Automatic Compound Inflation OptionAutomatic compound inflation option (ACIO) means your daily benefit amount and maximum lifetime benefit will automatically increase by 3% compounded every year without a corresponding increase to your premium. Future Purchase OptionFuture purchase option (FPO) means every two years we will offer an increase to your daily benefit amount and maximum lifetime benefit based on the change in the U.S. Department of Labor's Consumer Price Index for All Urban Consumers, All Items (CPI-U). If you accept the offer, your premium will also increase. If you decline the offer three times, we will no longer offer increases to your coverage until you provide evidence of your good health that is satisfactory to us. Compare options 2 U.S. Department of Labor, Bureau of Labor Statistics, "Historical Consumer Price Index for All Urban Consumers," 30-year average from 1992-2021, https://data.bls.gov/timeseries/CUUR0000SA0 (accessed July 2022). 3 The Federal Long Term Care Insurance Program, "The FLTCIP 2021 Cost of Care Survey," conducted by Long Term Care Group, Inc., March 2022. Things to keep in mind...Maximum lifetime benefitYour maximum lifetime benefit (MLB) is equal to your daily benefit amount multiplied by your benefit period (in days). This is the total amount we will pay for your covered services.
Example: 90 day waiting periodThe waiting period is the number of calendar days you must be eligible for benefits before we will pay the benefits of your plan. It's similar to a deductible for other types of insurance such as health or car insurance. The FLTCIP has a 90 day waiting period. Related contentGuided PlannerOur Guided Planner will help you build a plan based on three benefit choices. These, along with your age, will determine your coverage and premium. Calculate premiumsUse our Premium Calculator to compare options and premiums for different plans. We offer four prepackaged plans or you can customize your own. Leaving the FLTCIP Website You have requested a website created and maintained by someone other than LTCFEDS.com. We are providing this link for your convenience. The website you are linking to will have legal notices, privacy policies, or other requirements that differ from those of LTCFEDS.com, so you may want to review them. We do not control or guarantee the accuracy, relevance, timeliness, or completeness of that website. Would you like to proceed to the external website? One of the biggest concerns most people have is the rising costs of health care. The ever-growing cost of long-term care services is a significant part of this concern. A well-used strategy to assist you in transferring the risk of your future long-term care needs is buying an affordable Long-Term Care Insurance policy. Long-Term Care Insurance has many moving parts to allow insurance consultants to build the best-individualized plan for their clients. The three areas that dictate the benefits available at the time a client has a claim are the monthly benefit amount, the lifetime benefits of the policy, and the inflation protection. All three components are necessary to build a balanced long-term care strategy; however, likely the most confusing to clients and most important to the expert assisting them is the inflation protection. Why Do You Need Inflation Benefits with LTC Insurance?Long-Term Care Insurance inflation protection is essential because the costs of long-term care services increase over time and your policy needs to do its best to keep pace with these increasing expenses. Typically, when you purchase an LTC Insurance policy, you are buying it to use in a future claim circumstance. The time you may actually utilize the policy's benefits could be ten, twenty, or more years from the date of purchase. Inflation protection grows policy benefits as the policy ages, so more substantial amounts of benefit are available at the time of claim, possibly keeping pace with the increasing costs of those services. The expenses associated with long-term care services are increasing between 3 – 5% per year on average. Cost of Long-Term Care Services are Expensive and Increase Over Time Additionally, the national average nursing home care expenses are just below $100K per year and most recipients of long-term care services need assistance between three and four years. You can see the current and future cost of long-term care services and supports by using the LTC NEWS Cost of Care Calculator by clicking here. If you are age 60 today you may likely pay $300 – 400K per year by the time you start using your benefits, depending on where you live and the type of care you receive. Imagine your costs if you are now in your 40s or 50s. To ensure the policy's benefits are adequate to cover these expenses when you need them, inflation protection needs to be included in your LTC policy. Inflation Options with LTC InsuranceThere are several different types of inflation protection or benefit increase options available with Long-Term Care Insurance policies. Most insurance companies provide more than one option allowing you to choose the best fit for your circumstances. Simple Inflation Protection The most basic inflation protection found on policies is simple inflation protection. This inflation option adds the inflation interest to the base benefit on an annual basis. Most companies provide a 3% or 5% simple inflation option. This is typically the least expensive option for adding inflation protection and it comes with some drawbacks. Simple inflation protection has slower growth of the benefit amount and may not keep pace with long-term care services' growing costs. Compound Inflation Protection A long-term care insurance policy with compound inflation provides interest on interest compounding. Initial inflation protection is on the base, but every following year, the interest is added and compounded along with the base benefit. Compound inflation provides faster growth on the policy benefits that helps you keep pace with the increasing costs of services. Insurance companies usually offer 3% or 5% compounding. Some individual policies will give the client the option to choose anywhere from 1-5% compounding with options moving in increments of .25 basis points. You can tailor your policy specifically to meet your long-term care planning needs. In addition to this feature, some companies will allow a policyholder to increase their inflation coverage over the policy's age, allowing them to adjust the inflation protection up to ensure the policy keeps pace with growing costs. Compound inflation protection is a popular option because it helps the policy benefits grow faster. Moreover, for insurance policies that offer the partnership program, compound inflation protection is required. Indexed Linked Inflation Hybrid or linked benefit LTC policies are becoming a popular option for many people. Hybrid LTC policies typically have some form of inflation protection option. Most of them offer simple or compound inflation on the base of the policy and the long-term care rider. However, on indexed long-term care annuities and life insurance, companies may offer an index-linked inflation protection. This inflation protection is tied to the chosen index, most popularly the S&P 500. Indexed linked inflation benefits can be problematic for the underlying benefits because there are no guarantees for growth on the policies, and with the linked benefit universal life policy, the policy itself is not guaranteed. Additionally, the policies have more complexities because they have participation limits, crediting limits, and the insurance companies reserve the right to make changes to these. Guaranteed Purchase Option A guarantee purchase option is found on policies that do not have inflation protection. Known in the industry as a GPO, this option allows the policyholder to purchase more coverage later. This option does not provide any pricing guarantee. The costs to purchase more coverage will depend on your attained age at the time of purchase and any increases that have taken place on policy benefits. Purchasing an affordable Long-Term Care Insurance as a hedge against your retirement assets' depletion can be a valuable strategy. Having inflation protection on your LTC policy is arguably its most important component. Inflation protection establishes how the policy benefits will grow over time. It is imperative for you to understand the inflation protection options on your policy. Inflation protection is sometimes eliminated as an option on employee group plans or organization sponsored plans. If you are a participant in one of these, review your options and be certain of your strategy if inflation protection is not available. Compound inflation is typically the most lucrative option when it comes to growing policy benefits but having any inflation protection in place is better than none at all. Review your options and consider speaking with a Long-Term Care Insurance specialist that can detail and explain your options and help you make the best choice to meet your specific needs. The problem of long-term care is both a cash flow issue and a family issue. Preparing your family and finances for the financial costs and burdens associated with long-term health care is key to enjoying a successful future retirement. Planning ResourcesThere are many resources available on LTC NEWS that help educate you about the options available to you for safeguard savings and income and reduce the stress on your loved ones. As you prepare for your future retirement, better consider the physical, emotional, and financial burdens that get placed on you and your family. Find all the resources on LTC NEWS by clicking here. Find a Trusted and Qualified LTC SpecialistBe sure to seek the right type of professional help. Premiums can vary by over 100% between insurance companies, so a skilled and trusted professional can help you navigate the many companies and options. A qualified Long-Term Care Insurance specialist will help you obtain the best coverage at the best value. Discover your trusted pro by clicking here. Advertise on LTC NEWSLTC NEWS offers many marketing and advertising opportunities, including sponsored content and sponsorship of critical areas of the website. These marketing opportunities are ideal for businesses, including, but not limited to:
If your business wants to reach the decision-makers who are researching care options for a parent or loved one, LTC NEWS is a great option. You can also purchase sponsored content – a long-form article to express your insight experience and services. Contact the advertising department by clicking here. What is automatic inflation protection?A policy with automatic inflation protection, sometimes called an automatic benefit increase rider, increases your long term care insurance benefits automatically each year.
What is ACI 3% vs FPO?Premiums. A 3% ACIO premium does not increase automatically each year when the benefit increases. With FPO, premium starts out lower than with 3% ACIO. But, as the benefit increases, the FPO premium increases and eventually becomes greater than the 3% ACIO premium.
What is a compound inflation benefit rider?Compound Inflation Rider — a long-term care (LTC) insurance policy rider that increases the benefits provided by a rate compounded every year.
What is the difference between a guaranteed purchase option and an inflation protection option?A guarantee purchase option is found on policies that do not have inflation protection. Known in the industry as a GPO, this option allows the policyholder to purchase more coverage later. This option does not provide any pricing guarantee.
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What type of automatic inflation protection will provide the greatest benefit increases?
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