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In-Home Care – See Home Health Care.
Incontinence – The inability to control urination, bowel movements or both. Also see Continence.
Inflation Protection – A policy option that automatically increases benefits to help pay for expected increases in the cost of long-term care. Two types of protection, simple or compounded, are often available; both are typically based on an inflation rate of 5% per year.
The simple method increases benefit amounts by 5% of the original amount each year. This method is less expensive, but it is also one of the least effective, especially if you don’t expect to use benefits until 20 or 30 years from now. For example, in 30 years using the simple method, a $5,000 monthly benefit (today’s average cost for a nursing home) will grow to $12,500 per month.
However, long-term care costs actually increase about 5% compounded annually — that is, each year’s costs have been 5% higher than the prior year’s cost, not 5% higher than some original cost. At 5% compounded annually, today’s $5,000 monthly cost for a nursing home will grow to $21,610 in 30 years, leaving a shortage of $9,110 to pay out-of-pocket every month if you pick a policy with only simple inflation protection.
Caution — to reduce premium costs, some of the newest policies increase benefits based on the Consumer Price Index (CPI), compounded annually. As it turns out, this method can be even worse than the simple method. The insurance companies use the Consumer Price All Items Index — the one we hear about on radio and TV. Unfortunately, some components of the All Items Index have a higher inflation rate than others — one of those is the cost of long-term care.
Over the past 10 years, the CPI averaged only 2.5% compounded annually. But, the cost of long-term care actually increased 5% compounded annually. Using the 2.5% rate, in 30 years, today’s $5,000 monthly benefit will grow to only $10,488, leaving a shortage of $11,122 per month to pay out-of-pocket because the policy had insufficient protection against inflation.
Our recommendation — Even though your premium will be a few dollars more each month, we highly recommend that you get a policy with the 5% inflation protection, compounded annually. This will help insure that you have the benefits you’ll need if and when you ever need long-term care. And, you’ll lower the odds that you may have to rely on your children for help someday just to save a few dollars now.
Inheritance Tax – A tax that is levied by a state or local government upon those who inherit property; paid by the recipient.
Instrumental Activities of Daily Living (IADLs) – These are tasks that, in addition to activities of daily living, you must be able to perform in order to live independently (without the assistance or substantial supervision of another person). Examples include grocery shopping, meal preparation, using the telephone, laundry, light housekeeping, bill paying, and managing your medications. Most long-term care insurance policies will not pay benefits for the loss of ability to perform IADLs.
Inter Vivos Trust – A revocable trust created during someone’s lifetime to hold assets during that person’s lifetime, thereby removing those assets from probate at death; also called a living trust.
Intestate – Dying without a legal will.
Irrevocable Trust – A trust that, once executed, cannot be revoked or changed without the consent of the beneficiary.