Disability Income and Long-Term Care Insurance

Question 1

List 3 potential resources for disability income BESIDES INSURANCE

Answer 1

1. Social Security Disability payments (too low; unlikely to get it)
2. Worker’s Compensation (too low; unlikely for affluent clients)
3. State Disability Insurance (few states offer it; very limited)

Question 2

Primary Structure and Provisions of an Individual Disability Policy (7 things)

Answer 2

1. Guaranteed renewable
2. Non-cancellable (premiums can’t be increased)
3. Expiration Date
4. Indemnity Date
5. Elimination Period (waiting period)
6. Maximum Benefit Period
7. Definition of Disability

Question 3

What is the Occupational Disability Definition?

Answer 3

If you cannot perform the duties or material and substantial duties of your occupation.

-Sometimes singular unique specialty (claim will be payable even if you switch careers)

Question 4

What is the Gainfully Employed A Disability Definition?

Answer 4

Disabled due to an “accident or sickness and are unable to perform duties of occupation for which you are reasonably fit by education training and experience.”

Question 5

What is the Gainfully Employed B Disability Definition?

Answer 5

“Unable to perform duties of gainful employment.”

-Higher risk classifications
-Not Common
-Not for Affluent

Question 6

When it comes to the definition of disability loss of income/residual definition states…

Answer 6

The policy will pay benefits in proportion to loss of income attributable to an accident or sickness

Question 7

4 Step Process for determining need for Disability Income Insurance

Answer 7

1. Determine need for post-disability income
2. Determine current post-disability sources of income
3. Calculate the amount and timing of income shortfalls in the event of a long term disability
4. Tailor the design of disability coverage to supplement other insurance and income producing resources

Question 8

4 public resources for Long Term Care

Answer 8

1. Medicare - not enough
2. Medicaid - poor only, narrow/limited
3. Long term care partnership program - sort of like an add-on to LTC insurance that one can’t afford
4. Veterans Administration Health Care - Mainly for injuries; can receive LTC with copayments

Question 9

6 private resources to pay for Long Term Care Insurance

Answer 9

1. Medi-gap - supplement Medicare A&B (not a LTC solution)
2. Extended Group Medical Post Retirement - minimal LTC coverage (employer has to choose this too)
3. Family Support/Care - expensive
4. Community support
5. LTC Insurance - LEGIT
6. Self Insure - risky

Question 10

True or False

A client should usually only consider a comprehensive policy that covers facility care in a nursing home or assisted living facility

Answer 10

False; Facility care in a nursing home or assisted living facility
AS WELL AS
Home health care

Question 11

To be eligible for LTC; benefits insured must qualify based on one of these 2 criteria

Answer 11

1. Activities of Daily Living
   (If insured can’t perform a certain number of following: Eating, Dressing, Bathing, Toileting, Continence, Transferring)
2. Cognitive Impairment
   (Shopping, Managing money, Doing housework, Meal prep)

Question 12

Common characteristics of Long Term Care Insurance

Answer 12

-Benefit amounts (gotta plan here)
-Elimination period (time insured must wait before benefits; longer=lower premiums)
-Maximum benefit period (amount of time benefits go into action; can do “lifetime”)
-Inflation protection (assure benefits keep pace w/ LTC costs/inflation)
-Shared coverage (combining coverage; lower premium, but risky)

Question 13

2 basic formulas for LTC Inflation Protection

Answer 13

1. Compound Percentage Benefit
   - compound basis (interest)
   - most comprehensive coverage
2. Simple Percentage Benefit
   - simple basis (interest)

Question 14

6 LTC services (theoretically) covered by Long Term Care Insurance

Answer 14

1. Home Care
2. Adult Day Care
3. Assisted Living
4. Alzheimers facility (Asst. Living)
5. Nursing Home
6. Alzheimers facility (Nursing Home)