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INFLATION PROTECTION

Another important feature to include in a long-term care insurance policy is automatic compounded inflation protection. This is one of the distinguishing features of a Partnership policy and also the inflation protection is a valuable benefit regardless of whether the policy is a Partnership policy.

Inflation protection increases your benefits each year your policy is active. Under the Partnership, the premium stays level and does not automatically increase even though the benefits increase on an annual basis. However, it is possible that an annual premium increase could be implemented by the insurance company affecting all like policyholders.

If you purchase a regular long-term care insurance policy, check to make sure it contains automatic compounded inflation protection. A policy paying out $200/day could be worth less 20-30 years from now if the benefits were not inflated. If the benefits were not inflating each year, you could have a substantial out-of-pocket expense to make up the difference between the actual charge and what the insurance policy will pay.

The Deficit Reduction Act (DRA) requires Partnership policies to provide compound annual inflation for certain policyholders. For a person who is less than 61 years of age as of the date of purchase, the policy provides at minimum one percent compound annual inflation protection. For a person who is at least 61 years of age but less than 76 years of age, the policy provides some level of inflation protection (simple or compound) that may not be less than one percent per year, or a rate equal to the Consumer Price Index. For any person who has attained the age of 76, inflation protection may be provided but is not required. If it is provided after age 76, it must be at least one percent.