LTC Costs

As an example of long-term-care cost inflation, policy riders of two general types are normally provided. The first is a simple inflation rider that provides a 5 percent simple yearly increase in the benefits provided for both nursing-home and in-home care, with a level initial premium that reflects the 5 percent. A second alternative is a compounded inflation rider that is also set at 5 percent, but has a substantially different benefit as it increases over the years. Those benefits are shown in the following table.

Even if costs only rise 5% a year, two years in a nursing facility will cost more than $130,000 in 10 years. Just look at the cost of nursing care for the next 20 years. The following benefits are based on projected inflation:

Year	5% Simple Inflation	5% Compounded Inflation
2000	-- $ 45,000 --
2001	$ 47,250	$ 47,250
2002	$ 49,500	$ 49,612
2003	$ 51,750	$ 52,093
2004	$ 54,000	$ 54,698
2005	$ 56,250	$ 57,433
2010	$ 67,500	$ 73,300
2015	$ 78,750	$ 93,552
2020	$ 90,000	$119,398

Note: Calculated based on the daily nursing facility private pay rate for each year multiplied by 365.