Disability and LTC Insurance

Question 1

Definition of Disability

Answer 1

Total disability - inability to engage in OWN occupation (OWN - usually best answer)

More Strict Total Disability (modified OWN Occupation)(Modified Any) - Unable to engage in ANY occupation for which the person is qualified by education, experience, or training.

Split definition. Own for a certain number of yrs and then Any.

Question 2

Disability SS Definition

Answer 2

Inability to engage in any substantial, gainful activity by reason of any medically determined physical or mental impairment expected to result in death or which will last for longer than 12 months.

Focuses more on loss of income
Covers partial disability

Question 3

Noncancellable

Answer 3

Disability contract that guarantees individual can keep policy in force by paying premium

Premium will not increase

Normally renewable to age 65

Question 4

Guaranteed Renewable

Answer 4

Disability contract that will remain in force as long as premium is paid but the premium may increase on a class basis not individual basis

Cheaper than Non-cancellable

Question 5

Conditionally renewable

Answer 5

Allows Noncancellable or Guaranteed renewable to be renewed after age 65 if active employee.

Usually 2 yr benefit

Premium is adjusted

Question 6

Disability benefit period

Answer 6

Typically until age 65.

Some for a set time period (like 5 years)

Question 7

Elimination Period

Answer 7

Waiting Period

Longer the waiting period the cheaper the deductible

Most have 90 day

Question 8

Presumptive Disability

Answer 8

Benefits will be paid if the insured loses sight, hearing, speech, hands, feet. Some policies don’t cover all the loses.

Paid even if obtains a different job

Question 9

Disability Benefit Amount

Answer 9

Typically 50-60% of earnings

Typically lower as earnings increase

Question 10

Underwriting requirements Disability policy

Answer 10

Earned Income
Unearned Income
Net Worth (financial Statement)

Question 11

Partial Disability Benefits Rider

Answer 11

most add at no cost

Usually 1/2 of total disability benefit
waiting period
short period of time (6mo)

Question 12

Residual Disability Benefit Rider

Answer 12

Proportional Disability Benefit

expensive
benefit payable in proportion to insureds reduced income.
Own occupation rider

Question 13

Guaranteed Insurability Rider

Answer 13

can purchase additional amounts of coverage without proof of insurability. Subject underwriting and additional premium. Usually up to 60%

Question 14

COLA Rider

Answer 14

either fixed % or floating % reflecting inflation index

increases premium

Question 15

Social Insurance Substitute Benefit (SIS)

Answer 15

Additional benefit above base benefit that is reduced by SSI Disability payment.

Question 16

Taxation Disability Premiums and Benefits

Answer 16

Employee Owned
Premiums not deductible
Benefits are tax-free

Employee Owned- Employer Pays entire amt under (informal) bonus arrangement (section 162)
Premiums - deductible by employer
Benefits - tax free

Employee Owns- Employer pays under salary continuation plan (Formal )
Premiums- deductible by employer
Benefits- taxable to employee

Partnership/S Corp
Premiums - deductible
Premium cost includable as taxable income to partner or 2% shareholder (conduit income)
Proceeds- excludable taxable income

Question 17

Long term Care Insurance Individual Eligability

Answer 17

Chronically Ill
-unable to perform 2 or more ADL’s with out substantial help 90 days+

HIPPA ADL’s- eating, bathing, dressing, transferring bed to chair, toileting, continence and is considered chronically ill.

Substantial cognitive impairment

Question 18

LTC Insurance Services Covered

Answer 18

skilled, immediate, custodial, home health, and adult day care

Question 19

Benefit Period and Elimination Period LTC

Answer 19

elimination - 30-365 days

benefit period - 2yr to lifetime

Question 20

Benefit Amounts LTC

Answer 20

No limit on amount one can purchase
Typically sold in increments of 10$ per day
$200.00 per day is lower limit
Home health - extra

Underwriting more restrictive as age increases

Question 21

Taxation LTC

Answer 21

Qualified LTC services - premiums paid deductible up to certain $ amt limitations that increase with age

unreimbursed expenses deductible as itemized expense subject 10% AGI floor

Benefits received not taxable up to cap (190/day inflation adjusted or $340/day 2016)

Question 22

Qualified LTC

Answer 22

does not provide cash at surrender
must be guaranteed renewable
Premium deduction based on age
Benefits received subject to $ cap no matter what type of care
Can not be cash value policy
Can be part of a Life Ins cash value policy rider

If non-qualified, premiums can’t be deducted
Can’t use FSA to pay premiums.

Question 23

Qualify for Skilled Nursing

Answer 23

To qualify or skilled nursing under Medicare

• condition must require skilled nursing
• has been hospitalized for 3 days
• admitted with/in 30 days of leaving hospital
• same condition as treated in hospital
• medical professional certifies individual needs services

Question 24

Skilled Nursing Coverage Medicare A

Answer 24

First 20 days -medicare Patient Pays $0

21-100 Medicare with a co-payment Medicare pays $161

100+ Patient pays

to qualify person must be expected to improve

Question 25

Medicaid

Answer 25

Social Security provides to state for those with insufficient funds to pay medical

Must meet income and asset limits
>2000 assets

Question 26

Deficit Reduction Act 2006

Answer 26

Can’t give money or assets away to qualify for Medicaid…w/in 5 years

Question 27

Taxation

Answer 27

Individual Owns and pays premium:

• premiums not tax deductible
• benefits not taxed

Individual owns and EMPLOYER pays premium 162 bonus(taxed as bonus)

• premiums are deductible by employer
• benefits are tax free

Employee owns and EMPLOYER pays salary continuation: (group plan)

• Premiums are deductible
• benefits are taxed