Disability Income Insurance and Long-Term Care Insurance

Question 1

Definitions of Total Disability

Answer 1

• Own occupation: best
• any occupation: harder to claim benefits
• Split: own then any, certain periods
• totally disabled: SSD definition, longer than 12 months

Question 2

Continuance Provisions

Answer 2

• Noncancelable: premium wont increase
• Guaranteed renewable: premium may increase on class basis, not individual
• Conditionally renewable: allows policy to continue beyond age 65, must be employed, usually 2 year benefit

Question 3

Periods

Answer 3

• Benefit period: most to 65+ but can have shorter periods, no lifetime offered
• Elimination: longer period, lower premium, most 90 days

Question 4

Presumptive disability

Answer 4

total disability will be paid if lost sight, hearing, speech, hands, feet
- most policies include this
- some policies require permanent loss, others temporary

Question 5

Benefit Amounts

Answer 5

• typically 50%-60% of earnings, scaled down
• cant buy unlimited insurance

Question 6

Provisions (Riders)

Answer 6

Pigs Running Get Caught Soon
- Partial disability: Mostly no cost to add, Elimination, 6 mo benefit, 50% of total disability
- Residual (proportional): expensive, benefits can start immediately or after period, max benefit period, benefit proportioned to reduced earnings 20-80%, own occupation rider
- Guaranteed insurability: right to purchase additional amount without new proof of insurability, financial underwriting required, + premium
- COLA: fixed or floating %, + premium
- Social Insurance Substitute Benefit (SIS): monthly benefit = SIS - SSD. Base + SIS = Benefit

Question 7

Taxation of premiums and benefits

Answer 7

• EE owns and pays: tax free, not deductible
• EE owns and ER pays: 2 types
  1. section 162 bonus: tax free to EE (W2), deductible to ER
  2. continuation: taxable to EE, deductible to ER
• partner or 2% of S owns and company pays: tax free to EE and deductible to ER

Question 8

LTC Eligibility to start benefits

Answer 8

• cant perform at least 2 ADLs for at least 90 days
• • eating, bathing, dressing, bed to chair, toilet, continence
• cognitive impairment (Alzehimers, stroke)

Question 9

LTC Services

Answer 9

Sick Individuals Can Have Activities
- skilled, intermediate, custodial, home care, adult day care

Question 10

LTC Periods

Answer 10

• Elimination: 30 days to 365
• Max benefit: 2 years to lifetime

Question 11

LTC Provisions

Answer 11

• Inflation protection: daily benefit can increase by fixed or compound interest, more premium

Question 12

LTC Benefits

Answer 12

• no limit, typical $200/day - $500/ day
• qualified LTC expenses and premiums: deductible if itemizing, limitation goes up with age, subject to 7.5% AGI floor, benefits not taxable

Question 13

Qualified LTC policies

Answer 13

• if providing cash at surrender: cant be qualified, cant be deducted
• FSA: cant be used to pay premiums
  HSA: can be used to pay qualified premiums and expenses

Question 14

Medicare and LTC

Answer 14

• to qualify: needs skilled nursing, in hospital for at least 3 days, admitted to skilled nursing within 30 days pf hospital, skilled care is for condition treated at hospital, medical professional approves
• Benefits: first 20 days paid in full, 21-100 insured pays $200/day, 100+ days patient pays full cost
• condition must be expected to improve (Alz excluded)

Question 15

Medicaid

Answer 15

• jointly financed by federal and state
• Assets: most states need under $2,000 in countable assets, ineligible if have more than $650k in home equity (more in some states), annuities must name state as remainder beneficiary
• Services: inpatient, outpatient, nursing, physician, lab and x rays, home health
• Lookback rules: 5 years
• Some programs allow those who buy LTC and later need Medicare to protect their assets up to a certain amount of their LTC policies