Q: What is inflation protection for long-term care policies?

A: In order for your long term care insurance policy to keep up with the rising nursing home or home health care costs, there are four types of inflation protection available.

The first choice would be to buy no inflation protection, but purchase as much daily benefit as you can afford. This would be recommended for an older individual (age 80+) since this may be more cost efficient than a policy with all the "bells and whistles" (provided the individual is eligible for the purchase).

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The second is the guarantee purchase option or GPO provision. With this type of rider, you can increase the daily benefit every two or three years with no additional underwriting, but at your attained age at the time, so it will be more expensive. Also, if you've rejected this offer in the past, you may not be eligible after the company makes the offer available to you two or three times.

The third type is simple inflation. This protection is usually included in the cost of the premium, so it will be 40 to 60% higher than a different type of policy. This increases the daily benefit by 5% automatically every year. The best option is to have an automatic compound annual percentage increase in benefits. This typically adds from 3% to 5% to the daily benefit, compounded annually. For those individuals at a younger age and in good health, we usually recommend this type of inflation rider.