LONG TERM CARE 12
California Department of Insurance
Protecting California Consumers
Toll Free 800-927-HELP
affordable for many people, here is one method of selecting
the Maximum Lifetime Benefit. Choose the period that is roughly
proportional to your current non-housing assets that you might
otherwise have to use to pay for your care. (Remember that
the value of your house is not counted when applying for Medi-Cal).
What Other Policy Features Are Available. Inflation Protection
Most people buy long-term care many years in advance of when
they may need care.
The long-term care insurance you buy today must cover the
costs of care 10, 20 or more years in the future.
Inflation Protection is intended to help maintain the value
of the benefits you purchase today so they will keep up with
future increases in the cost of care . In the past, long-term
care costs in California have increased at an annual rate
of more than 5% - a faster rate than the general increase
in the cost of living for items such as food. Experts estimate
the cost of long-term care will continue to increase by 5%
annually. If costs do increase by 5 % annually, the cost of
care will double every 14 years.
A day in a nursing home that costs $141 today, will cost
$282 a day in 14 years; a year's stay in a nursing home that
costs about $51,465 today will cost $102,930. Protecting against
the rising costs of care is one of the most important choices
you will make. Inflation protection increases the Daily Maximum,
the Maximum Lifetime Benefit, and other benefit amounts.
If you purchase individual long-term care insurance, your
insurer must offer you at the time you purchase the policy
the option to purchase an inflation protection feature.
You will be given a choice between two ways of protecting
the value of your benefits against inflation.
•A Built-in Inflation Protection feature that automatically
increases the value of all the policy benefits annually.
(using either compound or simple interest increases)
•A Benefit Increase Option.
Built-In Inflation Protection
The insurer is required
by California law to offer you the option of a built-in 5%
annual compound inflation protection feature that automatically
increases your previous year's Daily Maximum and Lifetime
Maximum Benefit amounts by 5%. If you decide not to purchase
the built-in 5% compound annual inflation protection feature,
you will be asked to sign a rejection of the offer. Some insurers
may also offer you the option of a built-in 5% annual simple
inflation protection that automatically increases each year
the Daily and Lifetime Maximum Benefits by a fixed 5% of the
amounts in your original policy.
Benefit Increase Option
The other inflation protection option is called a Benefit
Increase Option. This option allows you to pay an additional
premium to increase the benefit coverage amounts at stated
intervals during the life of the policy (often referred
to as guaranteed insurability or future purchase options).
There is usually a limited number of increase options offered
to you over the life of the policy. If you decide not to
exercise this option one or more times when it is offered,
you will lose any chances to increase your benefits in the
future. With built-in inflation protection, the premiums
are designed to remain level and not increase even though
your benefit coverage amounts increase each year. The increases
in your benefits will continue as long as you keep the coverage,
even while you are receiving benefits. Policies with built-in
inflation.
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