Recommending appropriate benefits—and particularly the inflation protection benefit—is an important part of the sales process. I asked Stephen Nussbaum, an independent agent in Loudonville, N.Y., what he suggests for his clients and why.
Here's what Steve recommended:
Five percent compound. He only recommends this if it's required (example, NY Partnership). It's expensive, and the real inflation rate has fallen below 5 percent.
Three percent compound. Consider this instead of 5 percent. Most carriers have more favorable pricing for 3 percent compound versus 5 percent. The realities of long-term care inflation should enable 3 percent to be sufficient to maintain the purchasing power of the benefit. Using a higher initial benefit level with 3 percent will often be more cost effective than a lower benefit using 5 percent. Even at younger ages (40 to 55), Steve recommended this. Companies charge so much for 5 percent that his clients get a better deal with 3 percent and a higher daily benefit (if necessary).
Having no inflation protection. This may work well for much older buyers (80-plus) because there is less time for the benefit to erode. But even an 80-year-old purchaser could have 10 to 15 years of benefit erosion.
