Insurance companies continue to develop new ways to make benefit payments. Some insurers allow the insured to select each type of daily benefit independent of the others, rather than specifying a certain percentage that the insured is locked into. For example, an insured might be permitted to select a $100 daily nursing home benefit and a $70 home care benefit, regardless ofthe level of care provided. Policies that give more choices to the insured generally cost more than policies where the insurance company sets the limits with few, if any, choices for the client to make.
An increasing number ofcompanies now offer policies that consider policy benefits in terms of an "account" or "pot‑of‑money” or “pool” or some other descriptive term, as discussed regarding the reimbursement/indemnity types of policies. Under this type of arrangement, any benefits the insured does not use ‑– for example, because the actual daily costs are less than the available benefit amount –‑ are set aside into an account that may be used at a later date if needed. In some policies, a certain maximum dollar amount is established ‑ some multiple of the daily benefit ‑ and benefits for all types of covered care are paid from that account. In others, unpaid benefits from one part of the policy—such as nursing home benefits, may be used if necessary for some other part, such as home health care and vice versa.
Never guess or assume that any given policy pays alternate care benefits according to a certain formula. The agent must read the policy in order to accurately explain benefits to clients.
The benefit period, or length of time for which an LTC Insurance policy pays benefits, is another significant factor in the cost of a policy –– the longer the period, the greater the premium, assuming everything else is the same. Some LTCI policies offer benefit periods ranging from as little as one year to ten years or more and as long as a lifetime. Not all options are available from all insurers. A single insurer might offer more than one type of LTC Insurance policy, in which case the benefit periods available might differ for each policy type.
As a general rule, the periods are 1, 2, 3, 4, 5 years, and Lifetime. Those policies using the “Pool” concept express their benefit periods as the total amount that can be accumulated in the “Pool.” However, they usually also offer a lifetime policy, in which case there is no actual Benefit Period – the policy pays the costs of the longer-term care up to the Daily Benefit chosen. These policies, obviously, are quite expensive.
A lifetime benefit period might be referred to as "unlimited" or "unlimited lifetime" coverage.
In determining the “proper” or “recommended” benefit period, one statistic to keep in mind is that nearly 90% of all people over age 65 who enter a nursing home stay less than 5 years. Presently the average length of time for current residents is 2 ½ years. Therefore it would seem to reasonable to purchase a 3 or 4 year benefit period, preferably a 4 year policy, as that way, if nursing home care is needed for a longer time, 4 years should give the insured and family time to prepare for the financial demands of a longer stay. Still, it must be kept in mind that people are living longer so by the time that the insured would need to be admitted to a nursing home, the time that they will stay there will have increased on the average –– therefore the 4 years is preferable to the 3 year.
With the Partnership Program, the big factor is usually the maximum benefit amount as that is the amount that the policyholder can protect from Medicaid if he should happen to be in a situation where he needs to qualify for Medicaid.
Certain insurers whose policies cover nursing home care plus other types of care have different benefit periods for different care settings. For example, the insured may choose up to five years for nursing home care and two years for home health care. Some insurers establish the number of years themselves; others allow the insured to select different periods for each coverage if desired. At least one policy currently differentiates the type of care received in a nursing home, with benefits paid for two, three or four years for skilled and intermediate care, but for only 60 days when care is custodial.
Other companies offer different benefit period options based on the insured's age at the time of purchase. For example, one insurer offers people age 45 to 79, periods of two, four or six years or lifetime coverage, while people who are 80 to 84 may select only one ‑ or two‑year benefit periods.
Be cautious about policies that define their benefit periods as a one-time maximum period. This means the insured can receive policy benefits only one time. For example, suppose the benefit period is three years. An insured receives benefits for one year, and then recovers. If that insured should need long‑term care again at a later date, there is no coverage even though it would appear two more years worth of benefits are available. Most policies, on the other hand, pay for another round of long‑term care. Many policies have a restoration of benefits feature that assures benefits are available for future needs.
What is the best benefit period? Considering all of the variables that affect any given person's situation, the question is difficult to answer. Advocates often suggest three or four years to get the best combination of affordability and adequate coverage time; others recommend a six year minimum. Still another suggests each individual select the longest period he or she can realistically afford. Most people who are confined to a nursing home need care for three months or less, yet the average nursing home stay is two and one‑half years. And, the average is so long because of the few who will spend the rest of their lifetimes in a nursing home or receiving custodial care at home or elsewhere. In the end, for a healthy person, it's a gamble with nature. For those who can afford to pay for some period of LTC Insurance benefits, one year is probably better than none since the cost of one year of care currently ranges from $30,000 to $60,000 (however, one year coverage is not available in many states).
Most policies do allow for restoration of benefits. The insured must be off-claim before benefits are restored for periods ranging from 180 days to 6 months as a rule, with most policies using the 180 days. Most policies have a maximum number of times that they can restore, usually twice.
The point to remember in discussing restoration of benefits is that the period before benefits are restored must be as indicated (180 days or 6 months usually) in the policy and the insured must have been treatment-free before the claim or the new claim is for a different cause completely. This can be best explained by example: The insured had a hip replacement and as a result, he was eligible for 45 days of benefits. Eight months later he reinjured his hip while working on a home project and went back into the hospital, with several weeks of physical therapy later. He filed for new benefits, however it was discovered that since his hip surgery he had been taking prescription anti-inflammatories for the pain in his hip. Therefore he did not qualify for restoration of benefits as he had continued his treatment for the previous injury.
It helps to remember that this provision is required in many states because it was devised to protect elderly insurers who may have forgotten to pay the premium on time. The insured is still required to pay any back premiums if premiums are in default.
The policy wording states in essence, if the policy lapses, and it can be shown that the insured suffered from organic brain disease or loss of functional capacity at the time, the insured or any person acting on their behalf will have a specified time to request reinstatement (such as 5 months). Evidence of insurability will usually not be required; however the insured must pay all back premiums from the date of default and may be required to provide supporting documentation as to their physical or mental conditions at time of lapse.
Long‑term care policies frequently include a limitation on the payment of benefits for pre‑existing conditions - medical conditions the insured was treated for or knew about before the effective date of the policy. In some policies, a separate provision addresses pre‑existing conditions; in others, they are treated as an exclusion. This topic will be discussed separately from exclusions since pre‑existing conditions, though often excluded from early coverage, are usually covered after some period of time. Pre‑existing conditions, then, more accurately represent a situation that is subject to a policy limitation rather than a complete exclusion.
Be especially aware that insurers define pre‑existing conditions in different ways. The first part of the definition generally includes terminology similar to this:
"Any illness, disease or injury for which the insured was diagnosed and/or received treatment during (a specified period) immediately preceding the effective date of the policy."
The exact specified period is stated. For example, one policy might say
"...during the six months immediately preceding the effective date of the policy."
Another might stipulate:
"...during the 365 days immediately preceding the effective date of the policy."
Still another policy says:
"...during the two years immediately preceding the effective date of the policy."
Note: The NAIC Model LTCI Model Bill has the six months preceding and six months after" provision as mandatory on any Partnership Program policies.
The point is that any given policy states the precise length of time that the insurer looks back into the insured's past medical history to decide what constitutes a pre‑existing condition. If the time period is six months, then, a condition for which the insured was treated one year ago and not since that time would not be a pre‑existing condition.
Whatever the period stipulated, if the insured needs long‑term care because of any condition that meets the policy's definition, the insurer will not pay benefits. One must be aware that taking medication qualifies as "treatment." Typically, policies will eventually pay benefits even for a pre‑existing condition after the policy has been in force for a specified period.
The pre-existing conditions are different with tax-qualified plans as they provide that as long as the applicant was fully candid and provided the insurer all details regarding a particular medical problem, including the names of all attending physicians and consulted physicians and all medication in respect to such problem, then once the policy is issued, any disability related to that medical problem would be covered (subject, of course, to the terms of the policy and conditions and waiting period).
Basically, the typical regulation in Partnership states or those states that will be participating, in respect to pre-existing conditions are that a long-term care insurance policy or certificate, other than a policy or certificate issued to a group, may not use a definition of "preexisting condition" which is more restrictive than the following:
F "Preexisting condition" means a condition for which medical advice or treatment was recommended by or received from a provider of health care services within 6 months preceding the effective date of coverage of an insured person."
A long-term care insurance policy or certificate, other than a policy or certificate issued to a group may not exclude coverage for a loss or confinement which is the result of a preexisting condition unless such loss or confinement begins within 6 months following the effective date of coverage of an insured person. The Insurance Department reserves the right to extend this extension to specific policy forms if such extension is "is in the best interest of the public.
The state regulations usually address this in a manner similar to: "These rules does not stop an insurer from using an application form designed to elicit the complete health history of an applicant, and, on the basis of the answers on that application, from underwriting in accordance with that insurer's established underwriting standards. Unless otherwise provided in the policy or certificate, a preexisting condition, regardless of whether it is disclosed on the application, need not be covered until the waiting period expires. A long-term care insurance policy or certificate may not exclude or use waivers or riders of any kind to exclude, limit, or reduce coverage or benefits for specifically named or described preexisting diseases or physical conditions beyond the waiting period described in paragraph."
The conditions that generally trigger the need for long-term care are basically:
Having any of these conditions does not automatically exclude the applicant from LTCI coverage, with a couple of exceptions as noted. But regardless, they are the ones that are the most carefully scrutinized by the underwriters.
Dementia – Forget about it (or as they say in NY, “Foggedabowdit”). If the person has it, they cannot get LTCI as there is no recovery as far as underwriters are concerned.
Diabetes mellitus is different. Juvenile diabetes causes problems, particular if they are seniors with this disease for many years. Adult diabetes can be controlled by diet and/or medication, and underwriters can assess the results better. Of course they are looking for such things as loss of a limb or an eye, kidney disease, neuropathy, hypertension, etc. Many insurers will offer policies to those with diabetes that have it well under control with insulin without complication for some period of time. If the applicant is diabetic, then a good agent will ask about a specific list of complications, instead of just accepting “I’m doing just fine” as a response.
Emphysema or chronic pulmonary disorders are rarely insurable. Obviously, if one has a hard time just breathing, they will also have a hard time taking care of themselves. They may look at the insured’s use of tobacco and estimate the use of oxygen, but usually, it is just turned down.
High blood pressure (hypertension) if uncontrolled, can lead to a stroke so it is of concern to underwriters. Medication available today will generally keep it under control, so they may be insurable. If they have ever had a stroke, even a little, teeny, one, they are uninsurable with most insurers.
Fractures, if they are the result of dizziness or falling, or because of osteoporosis, they are of interest to the underwriters. Underwriters may link the fall or dizziness with osteoporosis and if there is a history of falling, they may be declined. Seniors are notorious for losing their balance and falling, with catastrophic results sometimes. Many times those bones don’t heal like they used to, therefore there must be nursing home or other type of care, so the underwriters get nervous when they see a history of falling.
Bone diseases and joint diseases send up a red flag for the possibility of arthritis or osteoporosis, either of which can cause fractures. Also, if the person is on prednisone, which is used to treat rheumatoid arthritis, it can cause bone damage if taken in large doses, another underwriting problem.
Cancer covers such a broad spectrum that there is no one hard-and-fast rule. If a person has had cancer at least two years earlier (some companies require a longer period) and is free of treatment for this period of time and the cancer did not spread to other organs, some insurers will approve a policy. If the cancer had affected the lymph nodes, then there could be a 10 year waiting period – which pretty well serves as a decline for the older applicants.
Atrial fibrillation, arrhythmia, irregularities in the heart beat increases the risk of stroke by six times. Certain medications can help the heart work more efficiently, along with anticoagulants such as coumadin, can reduce the possibility of a stroke by 60%, leaving 40% - therefore underwriters look very closely at those with these conditions.
All policies list certain conditions or circumstances that could lead to long-term care, but for which the policy will not pay benefits. Typical LTC Insurance policy exclusions are:
The agent must know the exclusions for each policy sold. Not all exclusions are found in every policy and those that are may be modified in some way. For example, while care resulting from substance abuse is generally excluded, the policy might pay for care resulting from addiction to drugs prescribed by a physician. Also, an LTC Insurance policy might list additional exclusions not mentioned here.
LTCI policies sold today are guaranteed renewable, which means as long as the insured pays the premiums the insurer may neither refuse to renew nor cancel the policy, regardless of the insured's health. In addition, the premium for a guaranteed renewable policy may be increased only if the insurance company raises premiums for every other policy of the same type sold to the same group of people. In other words, no single policy may be assessed a premium increase based on an individual insured's experience. However, if everyone in a certain geographical area or of a certain age group holding the same type of policy receives a rate increase, this is permissible. As for age, a guaranteed renewable policy prohibits insurers from increasing premiums solely because a specific insured is growing older. Each policy should clearly spell out the conditions under which an increase may occur. Insurers often guarantee the starting rate for some period, three or five years for example, regardless of external circumstances that might otherwise increase rates for all policyholders.
Some policies on the other hand, might be conditionally renewable. This means the insurer reserves some conditions under which it will not renew the policy and these must be specifically stated. Consumer advocates warn buyers away from any policy that gives the insurer the right to cancel or non-renew for any reason other than not paying premiums.
F A long-term care policy must provide that the insured is entitled to a grace period of not less than 30 days, within which payment of any premium after the first may be made.
This statement is rather universal.
The insurer may require payment of an interest charge not in excess of 8 percent per year for the number of days elapsing before the payment of the premium, during which period the policy shall continue in force. If the policy becomes a claim during the grace period before the overdue premium is paid, the amount of such premium or premiums with interest not in excess of 8 percent per year may be deducted in any settlement under the policy.
A long-term care policy can not be canceled for nonpayment of premium unless, after expiration of the grace period, and at least 30 days prior to the effective date of such cancellation, the insurer has mailed a notification of possible lapse in coverage to the policyholder and to a specified secondary addressee if such addressee has been designated in writing by name and address by the policyholder.
For policies issued or renewed on or after October 1, 1996, the insurer should, and in most cases, shall notify the policyholder, at least once every 2 years, of the right to designate a secondary addressee. The applicant has the right to designate at least one person who is to receive the notice of termination, in addition to the insured. By being so designated, it does not constitute acceptance of any liability on the third party for services provided to the insured. The form used for the written designation must provide space clearly designated for listing at least one person. The designation shall include each person's full name and home address.
In some states, and in compliance with most existing laws/regulations, there is a waiver required and such notice of protection against unintended lapse is often stated on the policy. In the case of an applicant who elects not to designate an additional person, the waiver would state:
Protection against unintended lapse.--I understand that I have the right to designate at least one person other than myself to receive notice of lapse or termination of this long-term care or limited benefit insurance policy for nonpayment of premium. I understand that notice will not be given until 30 days after a premium is due and unpaid. I elect NOT to designate any person to receive such notice.
Notice shall be given by first class United States mail, postage prepaid, and notice may not be given until 30 days after a premium is due and unpaid. Notice shall be deemed to have been given as of 5 days after the date of mailing.
If a policy is canceled due to nonpayment of premium, the policyholder is usually entitled to have the policy reinstated if, within a period of not less than 5 months after the date of cancellation, the policyholder or any secondary addressee designated demonstrates that the failure to pay the premium when due was unintentional and due to the cognitive impairment or loss of functional capacity of the policyholder.
Policy reinstatement is always subject to payment of overdue premiums. Laws generally specify that the standard of proof of cognitive impairment or loss of functional capacity shall not be more stringent than the benefit eligibility criteria for cognitive impairment or the loss of functional capacity, if any, contained in the policy and certificate.
The insurer may require payment of an interest charge not in excess of 8 percent per year for the number of days elapsing before the payment of the premium, during which period the policy shall continue in force if the demonstration of cognitive impairment is made. Under the NAIC Model and most state laws, if the policy becomes a claim during the 180-day period before the overdue premium is paid, the amount of the premium or premiums with interest not in excess of 8 percent per year may be deducted in any settlement under the policy.
When the policyholder or certificateholder pays premium for a long-term care insurance policy or certificate policy through a payroll or pension deduction plan, the requirements above need not be met until 60 days after the policyholder or certificateholder is no longer on such a payment plan. The application or enrollment form for such policies or certificates shall clearly indicate the payment plan selected by the applicant.
A rather standard provision states that if a policy is canceled due to nonpayment of premium, the policyholder shall be entitled to have the policy reinstated if, within a period of not less than 5 months after the date of cancellation, the policyholder or any secondary addressee demonstrates that the failure to pay the premium when due was unintentional and due to the cognitive impairment or loss of functional capacity of the policyholder.
Today’s LTCI policies are offered to people as young as 18 or 20, or even no minimum age. In practice, most policies are offered to people from age 50 to age 84, though many are now offered to people in their 40’s with employer-sponsored or group LTCI. Even insurers who will write LTCI policies for younger people usually direct most of their marketing efforts to people who are older than 50 because younger people generally show less interest. Some agents and insurers may have a different philosophy and choose to actively solicit the younger business. Employer‑sponsored or, group LTC Insurance is an exception; as younger age groups are targeted.
There are some policies designed to appeal to much older people and written with special features designed to appeal to the quite elderly. For example, currently some insurers offer older seniors a policy with a premium guaranteed to remain level for the life of the contract. Another allows inflation increases to be applied for the insured's lifetime, rather than expiring at a specified age, such as 85. Insurers will no doubt continue to innovate based on marketing and claims experiences, resulting in new features to appeal to those people insurers particularly want to target.
An individual LTCI policyholder has the right to return the policy within 30 days after its delivery and to have the premium refunded if, after examination of the policy, the policyholder is not satisfied for any reason. Regulations require that a notice to this effect be prominently displayed on the policy.
Inflation Protection has been touted for years by consumer advocates and later by regulatory bodies. At the present time it mandatory for certain ages, both by the NAIC Model LTCI Act and by recent legislation in many states. Therefore, it behooves an agent to be well acquainted with this feature as it is one provision that must be carefully explained with every applicant.
Regulations are rather specific in this area and state that any insurer offering a long-term care insurance policy, certificate, or rider must offer, in addition to any other inflation protection, the option to purchase a policy that provides that benefit levels increase with benefit maximums or reasonable durations, to account for reasonably anticipated increases in the costs of services covered by the policy. The NAIC Model and many states provide that the inflation protection option required by this paragraph must be no less favorable to the policyholder than one of the following:
1. A provision that increases benefits annually at a rate of not less than 5 percent, compounded annually.
2. A provision that guarantees to the insured person the right to periodically increase benefit levels without providing evidence of insurability or health status, if the option for the preceding period has not been declined. The total amount of benefits provided under this option must be equal to or greater than the existing benefit level increased by 5 percent compounded annually for the period beginning with the purchase of the existing benefits and ending with the year in which the offer is accepted.
3. A provision that covers a specified percentage of actual or reasonable charges and does not include a specified indemnity amount or limit.
An "Outline of Coverage" is required in many (most states) and is required per the NAIC Model Bill. Even if the state does not have such a requirement, it is such a "common-sense" and consumer oriented provision, that such provisions will be required sooner or later.
The following information must be included in or with the Outline of Coverage:
1. A graphic comparison of the benefit levels of a policy that increases benefits over the policy period and a policy that does not increase benefits, showing benefit levels over a period of at least 20 years.
2. Any premium increases or additional premiums required for automatic or optional benefit increases. If the amount of premium increases or additional premiums depends on the age of the applicant at the time of the increase, the insurer must also disclose the amount of the increased premiums or additional premiums for benefit increases that would be required of the applicant at the ages of 75 and 85 years.
The insurer may use a reasonable hypothetical or a graphic demonstration for the purposes of the disclosures.
Rather exhaustive studies conducted by AARP and others have revealed interesting data concerning the Inflation Protection in LTCI policies, and have put some old saws to rest, namely the concern by many agents that since the cost of this protection was relatively high, the insured would forgo more meaningful protection——such as a more realistic daily benefit—but such does not seem to be the case very often.
Some of their interesting findings are:
The adequacy of the inflation rider depends in part on the types of services consumed.
Given the historical trends in long-term care costs, the insurance policy designs that individuals purchase, and the projected trends in use of institutional and home and community-based care services, a 5 percent compound inflation rider is likely adequate to finance the future long-term care costs of most policyholders: more than 80 percent of the costs of care will be covered by such policies. However, this conclusion depends on the continued shift in service use away from nursing home care and toward assisted living and home and community-based alternatives. Even in the context of the rider, considerable cost exposure may remain for those entering nursing homes, whereas those using home and community-based care risk overinsurance. Finally, to the extent that individuals purchase initially low daily benefit amounts, even with an inflation rider it will be difficult to “catch up” and minimize out-of-pocket expenses.
Clearly, the purchase of an inflation rider makes the most sense for young buyers. Even in periods characterized by modest rates of inflation, a 5 percent compound rider is warranted. Although insurers can take a number of steps to help make the protection more affordable, risk pooling to cover future price increases is still the most efficient means to prepare for the contingency.
Given that many individuals who purchase LTC insurance policies may not access benefits for many years, benefit indexing is a particularly important mechanism for ensuring that insurance benefits keep pace with inflation. This is particularly true given that one out of three individual buyers is below the age of 65 (HIAA 2000b). But the appropriate level of such indexing is difficult to discern. Will a 5 percent compound rate index adequately cover expected increases in long-term care costs? Will such a feature lead to “overinsurance” if benefit increases turn out to be greater than costs at the time a policyholder accesses benefits?
Depending on the rate of inflation, benefits can erode significantly in the absence of any inflation coverage. For example, if long-term care costs increase by 3 percent per year, then in the absence of any inflation protection, the daily benefit of a policy would cover roughly 64 percent of the expected costs. However, if an individual had purchased a 5 percent compound inflation rider, then benefits potentially available from the policy would exceed future expected costs of care. The implication is that the individual overinsured for the inflation risk, as most policies pay only up to 100 percent of the daily costs of care.
The studies have shown that about four in five policies with inflation riders are comprehensive; that is, they cover services in both home care and institutional settings. In contrast, policies without inflation riders are more likely than policies with inflation riders to cover only nursing home or only home care. There is also a relationship among the purchase of an inflation rider, the duration of coverage, and daily benefit amounts. For example, policies with inflation riders provide more durational coverage for institutional care but less for home and community-based care (compared to policies without the rider). Also, compared to policies without the rider, daily benefit levels for institutional care are higher among policies with an inflation rider but are slightly lower for home and community-based care coverage.
More than half of policies with inflation riders also have elimination periods of 90 days or longer. Only roughly two in five policies without riders have such long elimination periods. Finally, the lower average premiums shown in Table 2 that are associated with inflation protection policies are due to the fact that the average age of individuals buying the protection is much lower than the age of those who do not buy it. All other things being equal, the premiums for policies with inflation riders are much higher than the premiums of policies without riders. That is, most purchasers of policies with inflation riders are not forgoing other policy features.
F Given the historical trends in long-term care costs, the insurance policy designs that individuals purchase, and the projected trends in use of institutional, home, and community-based care services, a 5 percent compound inflation rider is likely adequate to finance the future long-term care costs of most policyholders: more than 80 percent of the costs of care will be covered by such policies.
However, this conclusion depends on the continued shift in service use away from nursing home care and toward assisted living and home and community-based alternatives. Even in the context of the rider, considerable cost exposure may remain for those entering nursing homes, whereas those using home and community-based care risk overinsurance. Finally, to the extent that individuals purchase initially low daily benefit amounts, even with an inflation rider, it will be difficult to “catch up” and minimize out-of-pocket expenses.
Individuals accessing home and community-based care as well as assisted living care will have the lowest out-of-pocket payments, whereas those entering nursing homes will have the highest--up to 30 percent of the daily costs of care. Even so, given historical increases in costs and the declining use of nursing home care, to purchase a higher rate inflation rider (higher than 5 percent), would result in significant overinsurance and would therefore be inefficient from a consumer welfare perspective.
The purchase of an inflation rider makes the most sense for young buyers. Even in periods characterized by modest rates of inflation, a 5 percent compound rider is warranted. Self-insuring for the inflation risk may make sense only for older purchasers (age 70 and over). The extent of risk aversion influences the perceived value of the rider and will therefore partially determine whether the rider is purchased. Although insurers can take a number of steps to help make the protection more affordable, risk pooling to cover future price increases is still the most efficient means to prepare for the contingency.
The Deficit Reduction Act requires that Partnership policies sold to those under age 61 provide compound annual inflation protection.
STUDY QUESTIONS
CHAPTER FOUR
1. In determining the “proper” or “recommended” benefit period, one statistic to keep in mind is
A. 67% of all LTCI policies never pay a cent in benefits.
B. that nearly 90% of all people over age 65 who enter a nursing home stay less than 5 years.
C. more people are admitted to long-term care facilities than die each year.
D. agents make more money off commissions than do real estate brokers.
2. With the Partnership Program, the big factor is usually the maximum benefit amount
A. as that is the amount (of assets) that the policyholder can protect from Medicaid.
B. because that is the amount upon which all commissions are based.
C. as the benefit must not be larger than the present appraised value of the home.
D. as few companies will go over $150 per day in this calculation.
3. Be cautious about policies that define their benefit periods as a one-time maximum period because
A. this is an open-ended policy so there is no limit on maximum benefits.
B. this means the insured can receive policy benefits only one time.
C. this means that they are always tax-qualified and so they are expensive.
D. that means that benefits will always be taxed as ordinary income.
4. A condition for which medical advice or treatment was recommended by or received from a provider of health care services within 6 months preceding the effective date of coverage of an insured person, pertains to
A. a durable power of attorney trigger.
B. the incontestable clause.
C. minor ailments, such as the flu or a cold.
D. preexisting conditions in a policy.
5. War-related injuries, self-inflicted injuries, or injuries as a result of the commission of a crime, are
A. covered under the non-qualified LTCI policies.
B. are specifically covered under the Partnership Program.
C. are exclusions in an LTCI policy.
D. automatically forwarded to a special-risk pool.
6. A long-term care policy must provide that the insured is entitled to a grace period
A. of at least 90 days.
B. of not less than 30 days
C. on week.
D. of a period not less than 180 days.
7. The applicant has the right to designate at least one person who is to receive the notice of termination, in addition to the insured, such person is referred to as
A. the Secondary Addressee.
B. the Substitute Insured.
C. the Obligee.
D. the Trustee.
8. If a policy is canceled due to nonpayment of premium, the policyholder shall be entitled to have the policy reinstated if, within a period of not less than 5 months after the date of cancellation, the policyholder or any secondary addressee designated demonstrates that the failure to pay the premium when due was
A. failure of the Social Security check to arrive.
B. bankruptcy.
C. laziness.
D. unintentional and due to the cognitive impairment or loss of functional capacity of the policyholder.
9. An individual LTCI policyholder has the right to return the policy within 30 days after its delivery and to have the premium refunded if, after examination of the policy,
A. the benefits were not what was represented only.
B. the policyholder is not satisfied for any reason.
C. it is obvious that there was some sort of age, sex or racial discrimination.
D. the agent makes a minimum of three personal calls to satisfy the reasons for non-acceptance.
10. Under the NAIC Model, inflation protection in an LTCI policy must be not less favorable than three specific requirements, one of which is
A. a provision that increases benefits annually at a rate of not less than 5 percent, compounded annually
B. a provision that equals benefits to equal the Consumer Price Index.
C. a provision that increases benefits annually at a rate of not less than 5 percent annually.
D. the benefits must equal the highest benefit average among the top three insurers in that state that sell LTCI policies.
ANSWERS TO STUDY QUESTIONS
1B 2A 3B 4D 5C 6B 7A 8D 9B 10A