Inflation growth can impact long term care

Insurance agents and financial advisors need to start considering the impact of future inflation on the benefits they offer advises the director of the American Association for Long-Term Care Insurance.

“The front page of today’s Wall Street Journal graphically tells the story of how prices are rising around the world and that can significantly impact long-term care planning,” declares Jesse Slome, director of the American Association for Long-Term Care Insurance.  Slome issued an advisory to insurance and financial professionals to make sure they take the potential inflationary risk into account when working with clients and prospects.

“Based on our studies, the typical person purchasing long-term care insurance today is say age 60,” Slome notes.  “But, they generally won’t access benefits from their traditional long-term care insurance policy until they are age 85 or considering advances in medicine and longevity, perhaps until they are in their 90s.”
The long-term care expert shared an example of the potential devastating impact of inflationary cost increases could pose on a potential consumer.  “A modest two percent yearly increase in costs means today’s costs will be 61 percent higher in 25 years an 78 percent higher in 30 years,” Slome explains.

If costs rise just three percent annually, according to Slome, the future value of what many people purchased today may simply be far less of a benefit than they anticipated.  “:If the insurance protection you buy today lacks a provision to increase, you’ll get some benefit and something is always better than nothing,” Slome adds.

“A three percent modest annual increase in costs means that someone age 60 will face costs that are 103 percent higher when they are 85,” Slome calculates.  “Their policy will still be in force even if the insurance or financial advisor is no longer active.”

Slome serves as director of the American Association for Long-Term Care Insurance (AALTCI) that was founded in 1998 and is a national organization based in Los Angeles.  To learn more about long-term care insurance costs and options visit the Association’s website or call 818-597-3227.

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According a study of new buyers conducted annually by the American Association for Long-Term Care Insurance a growing percentage are choosing newer growth options including one that increases benefits by three percent annually.  “You want your coverage to grow to keep pace with anticipated increased costs over time,” explains Jesse Slome, executive director of the national trade organization.

Historically, the most popular option increased future benefits by five percent, Slome notes.   “Today, three percent is becoming the new five percent because consumers are finding it a far more affordable and therefore attractive option.”  The long term care insurance expert explains that costs for coverage and benefit increase options are closely tied to interest rates.  “With interest rates at near zero with no one predicting any change in the next few years, how can you increase benefits at five percent and keep the premiums affordable?” Slome asks.  “As a result, newer options which benefit consumers are being offered.”

The Association study found that 23.5 percent of new buyers opted for the three percent compound growth option in 2011 up from 16.7 percent during the prior year.   The percentage of those selecting the old-style five percent growth option declined from 42.8 percent to nearly 34 percent.

The need to plan for the eventual risk of needing long term care is vital for individuals over age 50 according to Slome.  “We tell people the risk they will need care is either zero percent or 100 percent and the question is, do you have a plan in place?”  Not all those who want to purchase insurance can do so according to the Association.  “You must be able to health qualify for this coverage and you must be able to afford the premiums,” Slome concludes.  “The newer options now available make it much more affordable for many more people who recognize the risk they face and want to prepare.”

For more information or to connect with a knowledgeable long term care insurance professional designated by the Association, call their Los Angeles national headquarters  at (818) 597-3227.  You can also access informative guides authored by Slome on reducing long term care insurance costs via the Association’s website.

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