The annual premium for long-term care insurance, like life insurance, is much less expensive if it is purchased at a young age. Younger applicants who are reasonably healthy are also more likely to qualify for insurance.
Because it is not uncommon for an individual to purchase a policy twenty to forty years before they might expect to use their benefits, long-term care insurance companies usually provide clients the option to purchase an optional benefit or contract rider or amendment that will enable benefits to increase over the life of the policy by a variable or preset percentage. The reason for this is simple. Prices for goods and services tend to increase.
Benefit increase riders can be the difference between a policy that performs very well when and if care is needed, and a policy that falls short. When purchasing a long-term care insurance policy, it is important to consider adding a benefit increase rider to your policy as an optional benefit. Some companies even allow policyholders to accept or decline the benefit increase offer as many times as they like on an annual basis. Benefit Increase Riders typically offer to raise benefits on an annual basis, using one of the following methods:
Simple Interest Benefit Increase
In this scenario, benefits can increase by a preset percentage on an annual basis. 1%, 2%, 3%, 4% and 5% and 6% increases are typical. The percentage increase is always based on the original daily benefit.
Compound Interest Benefit Increase
With a compound interest benefit increase rider, benefits increase by a preset percentage on an annual basis. A 5% compound increase is typical. The percentage increase in this case is always based on the then current daily benefit. This allows for a much more rapid increase of the daily benefit amount.
Consumer Price Index Urban (CPI-U) Benefit Increase (New York Life Insurance Company Only)
(Not available in all states)
Unlike simple increase or compound inflation riders, the CPI-U rider can increase benefits on a compounded basis each year at the same percentage that the costs of other consumer goods and services increase. While the simple increase and the compound increase riders are sufficient for many consumers, with the CPI-U Benefit Increases Option Rider, policyholders can be assured that their benefits will increase by the same amount that other goods and services increase, on a yearly basis. There is no guarantee, however, that the CPI-U increase will exactly match the percentage increase in the cost of long-term care services.
New York Life Insurance Company
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