Federal LTC Inflation Protection

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Snezz1e
Posts: 26
Joined: Wed Mar 14, 2012 11:48 am

Federal LTC Inflation Protection

Post by Snezz1e » Thu Jun 01, 2017 1:04 pm

I already have all my other insurance needs covered (Life/Disability/Umbrella). I currently max all tax advantaged accounts (TSP/Roth/HSA) and have a large emergency fund. Only debt is a 15 year mortgage. Current savings and pension is enough to replace over 100% of my income in retirement so I don't think I need to save anymore. There is likely enough for me to self-insure some LTC cost but I'm somewhat risk adverse so I'm thinking of signing up for the Federal LTC plan to cover some potential costs.

I'm trying to decide if I should be getting the inflation protection option or not. I'm 30 year old and the two options I'm looking at is:

$100 daily benefit
Unlimited Benefit Period
4% automatic compound inflation
$1,304 year

$450 daily benefit
Unlimited Benefit Period
Future Purchase Option
$1,032

The premiums are not the same and I can't make them the same since $100 is the minimum coverage and $450 is the max. However if $450 wasn't the max then the $1,304 premium would pay for about $568 daily benefit under the FPO plan. I'll use this number for comparison purposes.

Right now I like the FPO plan for the higher coverage now. At 4% growth the $100 will grow to $568 in about 45 years (age 75). This means that If I had to use this plan for any reason before 75 I would have better coverage under the FPO plan. Something like a serious accident 10 years from now requiring LTC means I have $568/day coverage under the FPO plan and only $148/day under the ACI plan.

The FPO plan also offers some more flexibility. The $568 is more than the actual cost of care now so I would likely reject the offered increases in the future (federal plan allows unlimited rejects without disqualifying from future increases). However, if in the future I developed a health issue that make it likely to require LTC then I can start accepting the FPO offers. Otherwise I will continue rejecting future increases and self insure for costs above what they will cover.

I know if at 75 I had no claims I would be better off with the ACI but it seems I'm giving up a lot.

Now I know premiums are not guaranteed but with the recent 83% increase I'm hoping they have better estimates now to prevent such substantial increases again. I'm also assuming that any future increases will be equal percentage wise between the two plans.

delamer
Posts: 5462
Joined: Tue Feb 08, 2011 6:13 pm

Re: Federal LTC Inflation Protection

Post by delamer » Thu Jun 01, 2017 7:51 pm

You are too young for LTC insurance. Save the premiums in a separate fund if you feel that need to address it.

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