In a Long-Term Care Insurance policy, a rider can be purchased to provide additional benefits over time to address the higher costs of care due to inflation. Usually, the policyholder can choose between Simple and Compound increases. Simple increases add the same dollar amount to the monthly or daily benefit each year. Compound inflation protection increases the benefit by a percentage of the current benefit. Since the cost of care increases has a compound effect, compound protection is generally more likely to keep up with the cost of care. Partnership rules require compound inflation at most ages.
In most states, Long-Term Care Partnership rules require a certain amount of inflation depending on the age of the policyholder at the inception of the policy