Competency 15 Section 2 Flashcards
Long-term care insurance can provide some predictability for an otherwise
unpredictable long-term care financing risk.
True. Long-term care insurance helps clients understand how much they will have to
pay for long-term care. If a client self-insures and pays out of pocket, the financial
risk becomes much more unpredictable. The amount of time someone will need
long-term care varies from a few months to many years and costs can vary
accordingly. (LO 15-2-1)
- Government programs are the preferred long-term care financing option for clients
who want flexibility with their long-term care services and locations.
False. While government programs are important long-term care planning features
for many clients, they offer fewer options for care services and settings than longterm
care insurance or other planning options. (LO 15-2-1)
- The smallest market for long-term care insurance is wealthy clients because they
can afford to pay their long-term care costs out-of-pocket.
False. The largest market for long-term care insurance is wealthier individuals. (LO
15-2-1)
- The ideal asset range for a couple looking to purchase long-term care insurance is
from $100,000 to $200,000 in assets outside of their home.
False. Affordability is an issue for a couple that has less than $200,000 of assets
outside of their home. (LO 15-2-1
- Since 2000, long-term care insurance premiums have decreased, making policies
more affordable
False. Policy premiums have been increasing over the past decade. (LO 15-2-1)
- The average person purchasing life insurance is roughly 70 years old and a few
years into retirement
False. The average purchaser of long-term care insurance is still working, typically
in their 50s (average age is 57), and purchases long-term care insurance when
first starting to really plan for retirement. (LO 15-2-1)
- The main reason long-term care insurance premiums have been decreasing is
because insurance companies mistakenly assumed almost 99% of insureds would
keep their policies and not let them lapse.
False. Long-term care insurance premiums have been increasing mostly due to
faulty assumptions about persistency rates. Insurance companies expected
roughly 95% persistency, while actual persistency rates have been between 99-
100% in the past decade. (LO 15-2-1)
- The standard long-term care elimination period is 30 days.
False. The standard long-term care elimination period is 90 days. (LO 15-2-2)
- Most long-term care insurance policies require an inability to perform at least two
activities of daily living for at least 90 days as a benefit trigger.
True. (LO 15-2-2)
10.A 90-day calendar elimination period can be longer than a 90-day service
elimination period
False. If a patient is receiving services on every day of the week, a 90-day service
elimination period will be the same as a 90-day calendar elimination period.
However, a 90-day service elimination period will never be shorter than a 90-day
calendar elimination period. (LO 15-2-2)
11.Choosing a service day elimination period over a calendar day elimination period can lower the policy’s premium.
True. A service day elimination period is a larger deductible than a calendar day elimination period, thereby decreasing the benefit amount. (LO 15-2-2)
12.A non-tax qualified long-term care insurance policy can allow for long-term care coverage based on a medical necessity
True. Non-tax qualified long-term care insurance policies have more flexibility to define benefit triggers than qualified policies. (LO 15-2-2)
13.A $5,000 monthly limit indemnity policy and a $5,000 monthly limit cash policy will always pay out $5,000 a month in benefits to an insured
False. An indemnity policy only pays out if the person is receiving care. (LO 15-2-2)
14.Single lump sum long-term care premiums are a common and widely used payment plan for long-term care insurance policies
False. Single lump sum premiums are not offered very often anymore. (LO 15-2-2)
15.Inflation protection is required on all long-term care policies.
False. Inflation protection is a common policy feature or rider and is required for certain government benefits, but it is not required in all policies. (LO 15-2-2)
16.Some long-term care insurance policies offer inflation protection riders linked to the consumer price index
True. (LO 15-2-2)
17.Inflation protection contract features and riders are expensive; forgoing this option can be an effective way to reduce premium payments.
True. (LO 15-2-2)
18.Future purchase options can be a useful contract feature for young clients looking to build a base policy to protect their insurability
True. Future purchase options give the insured the ability to add onto the policy at a future date and protects the client’s insurability. (LO 15-2-2)
19.Return of premium riders are very expensive long-term care insurance policy options and are not commonly available today
True. (LO 15-2-2)
20.The main benefit of a tax qualified long-term care policy over a non-tax qualified policy is that the benefits paid under the tax qualified policy are received tax free by the collecting insured.
False. The main benefit of a tax qualified plan is that the premiums may be deductible in certain instances. (LO 15-2-3)
21.Tax-qualified long-term care policies must be guaranteed renewable
True. (LO 15-2-3)
22.The majority of long-term care insurance policies sold are tax-qualified
True. 95% of long-term care insurance policies are tax qualified. (LO 15-2-3)
23.Non-tax qualified plans can offer advantages over tax-qualified plans by offering more liberal benefit triggers and lower premiums
True. Non-tax qualified plans can offer benefit triggers for medical necessities. Additionally, these plans can have longer elimination periods and less generous features that can reduce premium amounts. (LO 15-2-3)
24.In 2013, an individual can deduct some of his or her tax-qualified long-term care policy premiums as an itemized medical expense to the extent that the medical expenses exceed 10% of his or her Adjusted Gross Income.
True. Long-term care premiums are only deductible as an itemized expense to the extent they exceed 10% of the insured AGI in 2013 up to the stated age based amounts. As such, an individual might not be able to deduct all or any premiums but can deduct some up to the age based amounts if the other qualifications are met. (LO 15-2-3)