Planning for Long-Term Care Inflation Isn’t Rocket Science, Folks

The new John Hancock Benefit Builder product has turned long-term care insurance into an investment instead of an insurance product. The only way the benefit grows with the “automatic crediting” inflation option is if John Hancock makes more than 3% on the reserve funding the policy. So in essence, policyholders are participating in profit sharing with a whole lot to lose in purchasing power if profits are low. Is this really legal for insurance to operate this way? And since the premium will be so much less for this option, my concern is consumers (and agents) will flock to it, thinking they are getting meaningful inflation protection.

My advice to consumers is to please ask what your daily or monthly benefit will be in the future, adjusted for your age. If you are 50 or younger, you certainly want to know what it will be in 30 years. I believe the average cost of care for the nation could easily hit $25,000 a month in 30 years, using a current cost of about $6500 a month ($215 a day). That is based on historical inflation trends since 1987 when the cost of care was only $56 a day. So decide how much of the cost of care you want to insure (half, two-thirds, 80%, full coverage) and buy an initial benefit amount and inflation benefit to get you to that percentage in 30 years. Maybe you combine a traditional long-term care insurance policy with a combination life insurance/LTCi or annuity/LTCi if you want someone to get money back if you don’t need care. It doesn’t matter how you do it, just do it. It’s not rocket science, folks.