Inflation protection is an optional type of coverage offered by some insurance providers that increases the insurance policy’s scope of coverage during the policy term in order to keep pace with anticipated increase costs of services. This insurance feature is a type of investment which protects the policyholder from the expected risk of paying more costs over the next years. In other words, it ensures that you will continuously enjoy the insurance benefits today and onwards with simply paying ahead on the present money value.
Inflation eats the value of money as years go by and although it may be inevitable and unavoidable, there is a way to be financially shielded from it. Inflation protection is a form of investment which a policyholder may earn over the years and which provides reasonable return in due time.
Types of inflation protection
Automatic inflation protection
Automatic inflation protection is an adjustment option which normally comes with or inherent in your insurance policy from the very beginning. This protection may cause a substantial increase on the policyholder’s monthly premiums but the amount of benefits increases over the years while the premiums remain the same. It is tantamount to saying that the increase in premiums is considerably small compared to the benefits added. This inflation protection ensures that you can keep up with rising costs of long term care.
Special inflation protection
In the special inflation protection, the adjustment offer is made by the insurance provider in every three years in the same policy. This necessarily means that the policyholder’s insurance premiums go up every three years. At times, insurers base your new premium amount on your new age in addition to newer and increased level of benefits. There is a possibility that this age-dependent option may be too costly for the policyholder as he or she ages. When choosing this type of inflation protection, it is best that the policyholder understands all aspect of age adjustments and the extent of premium increase over the years. Special inflation protection is only offered once, if it is turned down it will not be offered the second time around.
Every insurance company is committed to ensuring that nothing in their rules and regulations aggrieve the interests of their policyholders. However, they differ in one way or another in terms of rate structures and policy requirements or conditions. Policyholders must be acquainted the terms and conditions stipulated in their insurance policies regarding increases and limitations.
Inflation protection is the common and important feature which is available in long term insurance policies. The price of goods today is different years ago and may be significantly different in the approaching years. The premiums that you may be paying today will naturally accelerate as time passes but the benefits may still be as it is today. In the future you’ll still need the benefits that you are enjoying today and it is good if by then but you can still afford to pay the premiums. However, if you have no lifelong financial security, inflation protection is the best investment.