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Inflation

Twenty years ago up until recently, 5% compound was the chosen gold standard for inflation protection when purchasing a LTC insurance policy. Today, because of low interests rates and low lapse rations, the LTCI carriers are making that selection cost prohibitive. Today, the new popular inflation option selected most often is 3.5% compound. Based upon a five year study by John Hancock, this choice is a good alternative.

The John Hancock findings below show the average annual increase in long-term care costs over the last five years across various care settings.

  • Nursing Home: Private Room - 3.6%
  • Nursing Home: Semi-Private Room - 3.6%
  • Assisted Living Facility - 2%
  • Home Health Care Aide - 1.3%
  • Adult Day Care - 1.6%

Use the chart below to see how different daily benefits will grow over a 20 and 25 year time frame with 3.5% vs. 5% compound inflation. Your age will be a good determining factor in selecting the appropriate inflation protection. If you do opt for lower inflation, consider starting out with a higher daily benefit to compensate for the reduction.

MedAmerica NYS Partnership
20 Year Growth
Amount 3.5% Compound 5% Compound
$280 $538 $708
$300 $577 $758
$320 $615 $809
$350 $673 $884
$380 $731 $960
$400 $769 $1011
25 year growth
Amount 3.5% Compound 5% Compound
$280 $639 $903
$300 $685 $968
$320 $731 $1,032
$350 $799 $1,129
$380 $868 $1,226
$400 $913 $1,290