Which statement about inflation protection in long-term care insurance is correct?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Inflation protection addresses the risk that a fixed daily benefit will lose purchasing power over time as the cost of long-term care rises. Common designs include compound annual increases (typically 3% to 5%), simple-interest increases, or the option to increase benefits later without medical underwriting. Because care costs escalate steadily, an LTC policy without inflation protection may pay only a fraction of future costs — especially for policies held for many years before claims begin. California's suitability and training rules emphasize the importance of inflation protection, and California Partnership policies build it into qualifying coverage, underscoring how central this benefit is to adequate long-term protection.
Why the other options are wrong
- B) Inflation protection increases the benefit amount; it has no effect on the premium level and does not make premiums decrease.
- C) Inflation protection is an optional design feature; not every LTC policy includes it, though it is strongly recommended and required for California Partnership policies.
- D) Inflation protection concerns benefit growth, not rate guarantees; premiums can still be raised on a class-wide basis with state approval.
Memory hook
3% to 5% compound keeps today's benefit paying tomorrow's care bill.