State RegulationsNY specificDifficulty 2/5
An applicant for a New York long-term care policy is worried that the cost of nursing home care will rise sharply over the coming decades. Under Reg 62, what inflation protection option must be made available to her?
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
Under Reg 62 (11 NYCRR Part 52 (Reg 62)), long-term care insurers must offer policyholders an inflation protection option under which the benefit increases at 5% compounded annually or in step with the Consumer Price Index for All Urban Consumers (CPI-U). Because long-term care claims often occur decades after purchase, compounding rather than a flat or simple increase is what preserves the benefit's purchasing power against rising care costs.
Why the other options are wrong
- A) A one-time increase at issue does nothing to protect the benefit across the decades before care is needed.
- B) Simple, non-compounding growth understates the cumulative rise in care costs; the Reg 62 option is 5% compounded annually or CPI-U indexing.
- C) Requiring proof of good health would defeat the purpose; inflation protection must grow the benefit automatically, without insurability proof.
Memory hook
Inflation option: 5% compounded, or ride the CPI-U.