Final answer:
While LTC policies are recommended to offer inflation protection, it is not a federal mandate. Inflation generally hurts lenders and individuals on fixed incomes, although Social Security benefits have partial protections through COLAs.
Step-by-step explanation:
The question regarding whether Long-Term Care (LTC) policies are mandated to offer inflation protection as an optional feature pertains to insurance regulations. While these regulations can vary by state, the National Association of Insurance Commissioners (NAIC) does recommend that insurers offer inflation protection. However, this does not mean that it's a federal requirement for all policies. Consumers should check the specifics of policies available in their region and consider if adding inflation protection is beneficial for their circumstances.
In terms of how inflation affects borrowers and lenders, inflation typically hurts lenders more because it decreases the purchasing power of the money they'll be repaid. On the other hand, inflation can actually benefit borrowers by allowing them to pay back their debts with money that is worth less than when they borrowed it.
For those on a 'fixed' income, such as retirees, inflation can have a detrimental effect as it erodes the purchasing power of their income. However, some pensions and benefits such as Social Security have Cost of Living Adjustments (COLAs) to help counteract the effects of inflation. Still, these adjustments may not fully match the real-world increase in prices, leaving individuals to bear some impact of inflation.