Disability and LTC Insurance Flashcards
Definition of Disability
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.
Disability SS Definition
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
Noncancellable
Disability contract that guarantees individual can keep policy in force by paying premium
Premium will not increase
Normally renewable to age 65
Guaranteed Renewable
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
Conditionally renewable
Allows Noncancellable or Guaranteed renewable to be renewed after age 65 if active employee.
Usually 2 yr benefit
Premium is adjusted
Disability benefit period
Typically until age 65.
Some for a set time period (like 5 years)
Elimination Period
Waiting Period
Longer the waiting period the cheaper the deductible
Most have 90 day
Presumptive Disability
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
Disability Benefit Amount
Typically 50-60% of earnings
Typically lower as earnings increase
Underwriting requirements Disability policy
Earned Income
Unearned Income
Net Worth (financial Statement)
Partial Disability Benefits Rider
most add at no cost
Usually 1/2 of total disability benefit
waiting period
short period of time (6mo)
Residual Disability Benefit Rider
Proportional Disability Benefit
expensive
benefit payable in proportion to insureds reduced income.
Own occupation rider
Guaranteed Insurability Rider
can purchase additional amounts of coverage without proof of insurability. Subject underwriting and additional premium. Usually up to 60%
COLA Rider
either fixed % or floating % reflecting inflation index
increases premium
Social Insurance Substitute Benefit (SIS)
Additional benefit above base benefit that is reduced by SSI Disability payment.
Taxation Disability Premiums and Benefits
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
Long term Care Insurance Individual Eligability
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
LTC Insurance Services Covered
skilled, immediate, custodial, home health, and adult day care
Benefit Period and Elimination Period LTC
elimination - 30-365 days
benefit period - 2yr to lifetime
Benefit Amounts LTC
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
Taxation LTC
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)
Qualified LTC
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.
Qualify for Skilled Nursing
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
Skilled Nursing Coverage Medicare A
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
Medicaid
Social Security provides to state for those with insufficient funds to pay medical
Must meet income and asset limits
>2000 assets
Deficit Reduction Act 2006
Can’t give money or assets away to qualify for Medicaid…w/in 5 years
Taxation
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
