Should you buy inflation protection for long-term care insurance? Absolutely. In fact, if you don’t think you can afford that extra coverage, you should probably rethink whether you should buy the insurance at all.

The issue of inflation protection was just one of the subjects that I, along with financial adviser Michael Kitces and insurance industry spokesman Jesse Slome, discussed on a Wall Street Journal webcast on Monday. The Journal’s Anne Tergesen wrote a nice article this week that also touched on the inflation issue.

There is a reasonable debate about how much additional coverage you should buy, but there is no doubt that nearly everyone should buy some. Here are just some reasons why:

Typically, buyers of long-term care insurance are in their 50s or early 60s. But you probably won’t need substantial help with daily living until you are in your 80s. That means the cost of long-term services and supports—whether you receive care at home, in a nursing home, or in some other setting–will rise year after year for thirty years before you ever collect benefits.

As a result, what looks like a pretty good benefit today will be worth far less when you eventually make a claim.

How much less? Say you buy a three year policy that promises to pay $150-a-day (a bit more generous than a typical policy). Today, according to the latest survey of long-term care costs by ltc insurer Genworth, a private room in a nursing home averages $240-a-day, or nearly $88,000-a-year. Your $150-a-day policy would cover 58 percent of the cost and you’ll pick up the additional $90 out of savings or retirement income.

That might be manageable. But if inflation averages 3 percent a year (the long-term average for the overall economy), in 30 years the purchasing power of that $150 will shrink to less than $62. Or to put it another way, that $240 daily cost of a nursing home bed would increase to $582. However you prefer to think about it, your insurance would cover only about one-quarter of your daily costs instead of nearly 60 percent.

It is true that inflation will also increase the size of your nest egg (in nominal dollars), but will you have the resources to pick up the difference?

Of course, there is no way to predict increases in long-term care costs over the next 30 years. The Genworth study and others like it provide some useful information but also can be misleading.

Here’s one problem: Genworth reports that the median cost for that private nursing home room increased by an annual average of 4.19 percent over the past five years. But that was a period when we were slowly climbing out of the worst recession since the 1920s and many measures of inflation, including labor costs, remained stagnant. Thus, I’d be very careful about using the last five years to predict the next 30.

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It’s a simple and reasonably fair concept – all else being equal, safer and more careful drivers pay less for their car insurance than do those having multiple accidents and/or moving violations. How much? Depending on the infraction one’s rates can jump by as much as a whopping 93 percent for a single ticket, according to a recent national analysis conducted in San Francisco.

Driving under the influence of alcohol or drugs is cited as being the top ticket among the most common moving violations at the aforementioned 93 percent penalty (and that’s on top of the cost of the ticket itself and any legal fees that might also be involved). Coming in a close second is reckless driving – a sort-of catch-all category used for serious infractions involving a wanton disregard for the rules of the road – which would be responsible for a still staggering 82 percent increase.

Lesser charges, from getting caught driving solo in a carpool lane to careless driving – piloting a car or truck without due caution in a manner that might cause damage or injury, from failure to yield right-of-way to talking on a cell phone while driving – will raise a drivers rates by an average of 18 to 27 percent. The most benign ticket would be a seatbelt use violation at a mere five percent upsurge in premiums. And these increases assume a hypothetical low-risk driver who otherwise boasts a clean record (see below).  Those with a history of multiple violations and/or accidents might see their rates skyrocket beyond affordability or have their policies cancelled depending on the motoring misdeed.

Here’s the list of “unlucky seven” top premium-busting traffic tickets:

1. DUI: 93 percent increase.

2. Reckless driving: 82 percent increase.

3. Careless driving — 27 percent increase.

• 16 to 30 mph over the limit: 28 percent increase.
• 31+ mph over the limit: 30 percent increase.

5. Failure to stop: 19 percent increase.

6. Failure to yield to pedestrians: 19 percent increase.

7. Driving in a carpool lane: 18 percent increase.

Fortunately motorists with at least moderately good driving records can often avoid negative effects of lesser charges. Some carriers will “forgive” a minor offense for a policyholder in good standing with an otherwise pristine history, while many states offer special courses to keep many moving violations from landing on a driver’s record. “Drivers who commit moving violations can take safety classes to improve their skills and remove blemishes from their records. Many of these courses are offered online and can be completed in just a few hours. Otherwise, these infractions can lead to higher car insurance costs for up to three years.”

Since some insurance companies are more tolerant of motorists having imperfect driving records than others, those facing a steep rate increase following a traffic violation or accident would be advised to shop around among multiple carriers to find one who’s willing to offer a lower premium. Those who may not be able to find a better deal elsewhere should be sure they’re taking advantage of all available discounts to help offset all or part of a rate increase. Most insurers will, for example, offer a discount for bundling house or apartment and auto insurance, and many will grant a rate reduction to policyholders who drive only a minimal number of miles each year and/or have special monitoring systems installed on their cars.

Also, consider raising deductibles for the comprehensive and collision portions of your policy, which cover physical damage to your car where another driver is not at fault. According to industry sources, boosting the deductible from $250 to $500 can shave around 30 percent off those sections of your car’s coverage. If you’re driving an older car that’s worth only a few thousand dollars if totaled, you might want to roll the proverbial dice and eliminate this coverage altogether.

And if that doesn’t do the trick, consider buying a make and model that’s inherently cheaper to insure. Crossovers/SUVs and minivans tend to deliver the lowest average premiums, while luxury models and rip-roaring sports cars command the highest rates. All else being equal, costlier autos cost more to insure than cheaper models, simply because there’s more money at stake for repairs or replacement.

Another – perhaps more drastic – solution would be to move to a state where drivers are inherently charged lower insurance rates, which can be affected by the level of competition among carriers and the percentage of uninsured and underinsured motorists on the roads (see our post on this topic). City dwellers could see big reductions in their premiums if they relocate to the sleepy suburbs.

Or better yet, stay sober, slow down, pay attention, and turn off the phone whenever you’re behind the wheel to avoid being written a ticket in the first place.

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In recent months, major insurers have adopted “gender distinct” rates for new coverage. Translation: If you’re a woman, you’ll now pay more than a man for the same coverage.

Rates for single women rose 20 to 40% last year, while rates for single men fell 15%, says Jesse Slome, executive director of the American Association for Long-Term Care Insurance (AALTCI) in Westlake Village, Calif. For couples, who pay blended rates, premiums rose 3%.

Here’s an example: If you’re a 55-year-old woman in good health, you’ll pay an average of $1,225 a year for a new policy providing $164,000 in benefits, without any built-in inflation protection. A man of the same age and health with the same coverage would pay $300-a-year less, according to the AALTCI 2014 Long-Term Care Insurance Price Index.

The difference in premiums is even greater if you buy a policy whose benefits grow with inflation, which many experts recommend. A 55-year-old healthy man would pay $1,765 a year for that same policy with 3% inflation protection, but a woman might pay over $2,300 annually.

Why are women now paying more than men for long-term care policies? Longevity.

Women typically live five to seven years longer than men, which means they’d need benefits for more years. “So, it makes sense that they would pay more than a man,” says Slome. “Prices for insurance are based on risk, which is why men pay more than women for life insurance and bad drivers pay more than good drivers for car insurance,” he says.

A Fight to Overturn New Pricing

But women are pushing back.

Last month, The National Women’s Law Center (NWLC) filed complaints with the U.S. Health and Human Services Department’s Office for Civil Rights against leading long-term care insurer Genworth Financial and three others — John Hancock, Transamerica and Mutual of Omaha. The group maintains that gender-based premiums violate a provision of the Affordable Care Act that bans sex discrimination in health care.

“Women already have a hard enough time making ends meet, earning only 77 cents for every dollar earned by men,” says NWLC Vice-President and General Counsel Emily Martin. “With lower wages to begin with, women simply can’t afford to pay 20 to 40% more than men for the same long-term care insurance.”

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