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Relationship of Cost of Care and Benefits
Comparison of the Automatic Compound Inflation Option and the Future Purchase Option
The following graphs compare monthly premium and Daily Benefit Amounts over time for purchase ages 50 and 65 for the following inflation options:
- Automatic Compound Inflation Option at 5% (5% ACIO),
- Automatic Compound Inflation Option at 4% (4% ACIO), and
- Future Purchase Option (FPO).
PLEASE READ THE FOLLOWING IMPORTANT ASSUMPTIONS ABOUT THE GRAPHS:
IMPORTANT ASSUMPTIONS
- The following graphs assume an initial Daily Benefit Amount of $150, a 90 day waiting period, and a 5 year benefit period.
- Horizontal ACIO premium lines in these graphs indicate that premiums will not automatically increase every year when benefits automatically increase. This DOES NOT mean that premiums will never increase for enrollees with ACIO. The underlying premium rates for both ACIO and FPO are NOT guaranteed.
- The graphs reflect two different scenarios: all FPO increases accepted and all FPO increases declined.
- For FPO and ACIO comparisons, we are assuming a similar annual rate of inflation increase for both: 5% or 4%. In reality, FPO increases can be higher or lower than ACIO rates under the Federal Long Term Care Insurance Program (FLTCIP) in any given year. Actual FPO premiums and benefits will vary depending on actual future inflation rates.
- The graphs do not imply that your coverage will end after 30 years.
As the Premium Comparison graphs illustrate, a 5% or 4% ACIO premium does not increase automatically each year when the benefit increases. With FPO, premium starts out lower than with 5% or 4% ACIO. But, as the benefit increases, the FPO premium increases and eventually becomes greater than the 5% or 4% ACIO premium. Because the FPO premium increases steeply during normal retirement ages, you should consider whether you will be able to afford the higher premium under the FPO. If you decline an FPO increase, your coverage doesn't end, your Daily Benefit Amount just does not increase.
The Daily Benefit Amount Comparison graphs show how the Daily Benefit Amount increases over time under 5% ACIO and 4% ACIO and how it would increase under FPO if similar benefit increases were to take effect. However, if you decline an FPO increase, your FPO benefit will not increase and over time may become substantially less than the 5% or 4% ACIO benefit.
The effect of FPO on your premium and benefit cannot be predicted, since it is based on a variable rate (the CPI-U). It is important that you understand and are comfortable with this aspect of the Future Purchase Option before you elect it.