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LONG TERM HEALTH NET

Example: If you choose a policy without inflation protection with a $100 Daily Maximum and a Maximum Lifetime Benefit of $36,500, your policy will only pay $100 a day even if the daily cost of care has increased to $200 and the cost of one year of long-term care has increased to $73,000 in fourteen years. If you choose Built-in 5% Compound Inflation Protection, the Daily Benefit will be $200 a day and the Maximum Lifetime Benefit will be $73,000 in fourteen years. If you choose Built-in 5% Simple Inflation Protection, the Daily Maximum Benefit will be $170 and the Maximum Lifetime Benefit will be $62,050 after fourteen years. Remember: the cost of long-term care will double every 14 years if inflation continues at the current rate of 5% and your income is unlikely to keep up with inflation after retirement.

In most cases, you will be better off purchasing a policy with a lower Daily Maximum Benefit plus 5% compound inflation protection than selecting a policy with a higher Daily Maximum Benefit with no built-in annual inflation increases in benefits. This is because you are paying a higher premium in the early years for a higher daily benefit than you need, and as the years go by the benefit continues to decrease in relation to the cost of care. However, before you make a decision, you might want to consult with a financial planner, an attorney, a HICAP counselor or a family member.

With the Benefit Increase Option, your premium will increase each time you choose to accept the insurer's offer to increase the coverage amounts. The premium increase for each benefit upgrade will be based on the amount of coverage added and your age at the time you exercise the Benefit Increase Option. Because rates for older individuals are significantly higher and you will be older when each upgrade is offered, each Benefit Increase Option you accept will result in a larger premium increase than the prior offers. The advantage of the Benefit Increase Option is that the initial premium you pay for the policy will be much lower than if you choose the Built-in Inflation Protection Option. However, in the long run, you may end up paying more in total premiums to protect your benefits against inflation protection because of the additional premiums you must pay to purchase each Benefit Increase Option. And, as you get older and the premiums for the benefit upgrades get larger with each offer, you may not be able to afford the offer to upgrade your benefits unless your income increases significantly in retirement or you have substantial savings. In the long run, however, policies with built-in inflation protection are probably more cost-effective and the premium payments more predictable than the benefit increase option.

The graphs below illustrate how annual premiums for policies purchased at age 45 or 65 will differ over time for the Benefit Increase Option (dotted line) versus 5% compound Built-In Inflation Protection Option (solid line). (The graphs assume that inflation continues at 5% per year). The annual premiums you will pay if you accept each benefit upgrade option will rise over time under the Benefit Increase Option, while annual premiums for policies with Built-In Inflation Protection are designed to remain level. The Benefit Increase Option is therefore best suited only for those who expect to have increased income or assets or reduced financial obligations in the future.

ANNUAL PREMIUMS

Benefit Increase Option vs. Built-In Inflation Protection Option
Premiums with Benefit Increase Option (----------------)
Premiums with Built-In Inflation Protection Option (___________)

Premium Discounts and Other Premium-Related Benefits
The premium you will pay may be adjusted from the ‘normal’ rate for a single individual. Many companies offer discounts if both spouses purchase Long-Term Care Insurance. Several provide discounts for those who do not use tobacco products and are the most healthy. Some companies provide that the policy of the surviving spouse is ‘paid-up’ when the first spouse dies - no further premium payments are required. A qualified agent can assist you in reviewing the options available.

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