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Is a long-term care insurance inflation protection rider worth it now?

This type of long-term care insurance rider can help protect you against inflation, but there may be other options.  Getty Images

If you're in the market for long-term care insurance, you may be thinking about adding an inflation protection rider amid today's stubborn inflation issues. Inflation protection riders can be added to long-term care insurance policies to protect you from the rising cost of healthcare, so they can be a smart option to consider in many cases. 

But, inflation is cooling right now. And, long-term care insurance inflation protection riders come at an additional cost. In turn, you may also be wondering whether it makes sense to pay more to add this type of rider to your policy. Here's what the experts say about whether it's worth adding an inflation protection rider to a long-term care insurance policy in today's economic environment. 

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Is a long-term care insurance inflation protection rider worth it now?

While inflation is cooling, price growth is a cyclical process, with cycles of prices heading up and then cooling thereafter. This matters because long-term care insurance is a long-term investment, so multiple inflation cycles could occur before you ever file a claim. 

As such, it makes sense in many cases to consider inflation as part of purchasing a long-term care insurance policy. 

"Healthcare inflation is higher than average and the average person will need care in their 80s," says Virginia Barausky, national director of sales for The Pinnacle Group, a company that helps consumers and financial advisors plan for long-term care needs. "Inflation is a key rider when looking to protect against the cost of long-term care." 

But an inflation protection rider isn't always the best option for addressing price growth, experts say. 

"Another option is to put more premium in upfront and create a bigger benefit to start with," says Keith Bercun, regional sales director at OneAmerica, a financial services firm. 

By doing so, you may save money on your policy while benefitting from a larger death benefit and more cash value growth. 

If cost is your main concern, though, it's important to compare these options with each policy you consider. In some cases, frontloading your policy with larger benefits will be cheaper. In other cases, an inflation protection rider may be less expensive. 

It's also important to try and determine when you may need your long-term care insurance coverage as you weigh your options. 

Your age should also play a role in your decision to either purchase inflation protection or front-load your policy. 

"Inflation protection is especially important to those purchasing long-term care insurance in their 40s, 50s, and 60s," says Lori Martin, CLTC, a trainer for Certification for Long-Term Care, which is an education company that certifies long-term care insurance agents. "If long-term care services aren't needed until the individual is 80 years plus, the inflation protection rider provides crucial growth of their long-term care funds."

"I will look at this benefit differently when assisting an individual in their 70s with long-term care planning," says Cobb. "Designing a plan with a larger monthly benefit and lower inflation protection can be more suitable for an older person.  Especially those with a lower budget for a long-term care policy." 

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How to decide if inflation protection is worth it for you

If you want to determine whether an inflation protection rider is worth the extra money, here are a few factors to consider during the process:

Get quotes for policies with inflation protection

Get quotes for the type of inflation protection you're considering. You'll typically have the options of 5% simple inflation protection (protection that does not compound), 3% compound inflation protection and 5% compound inflation protection. 

Keep in mind that simple inflation protection is based on the value of the policy. For example, if you purchase $300,000 in long-term care insurance coverage with a 5% simple inflation rider, the value of your policy will increase by $15,000 each year (which is 5% of $300,000). 

On the other hand, the value of your policy can increase more over time with a compound inflation rider. However, the cost difference can be significant, so weigh the pros and cons before making a decision. 

Get quotes for policies with more coverage

You may also want to consider whether frontloading your long-term care insurance policy makes more sense. For example, rather than purchasing $300,000 in long-term care insurance, you could purchase $500,000 to ensure that you're covered even as the cost of care grows. In some cases, this may be the cheaper option of the two. 

So, it can be worth asking your long-term care insurance agent for quotes on policies with higher values. While taking this route typically leads to increased premiums, a higher amount of coverage may be more affordable than the cost of an inflation protection rider. 

Compare the two to find out which is your better option

After you've gathered both types of quotes, you should compare the two options. If you find that inflation protection offers lower premiums, then the rider may be worth it for you. If you find that purchasing higher coverage results in lower premiums, then that may be the better option.

The bottom line

The cost of long-term care is expected to rise, so it's important to consider the impact of inflation as you shop for a policy. While an inflation protection rider can help protect against the rising cost of care, it's not your only option. Frontloading your policy could make sense, too. As you shop, compare the cost of adding a rider to your policy to purchasing a higher coverage amount — and be sure to also consider how your age plays into the equation. Chat with a long-term care insurance specialist now

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