CII R05 Long-Term Care Insurance 2

Question 1

An immediate needs annuity pays its income directly to a registered care provider. What is the tax advantage of this arrangement?

Accepted Answer

The income paid directly to a registered care provider is free of income tax

Answer

When the income from an immediate needs annuity is paid directly to a qualifying registered care provider, it is free of income tax. If paid to the individual, it becomes taxable income.

Question 2

What triggers a claim under a long-term care insurance policy?

Accepted Answer

Being unable to perform a specified number of Activities of Daily Living (ADLs)

Answer

LTC policies define a claim trigger as the inability to perform a specified number (typically 2–3 out of 6) activities of daily living, or a diagnosis of severe cognitive impairment such as dementia.

Question 3

What is the difference between a 'care fees plan' and a 'care annuity'?

Accepted Answer

A care fees plan is pre-funded, while a care annuity (immediate needs annuity) is purchased at the point of needing care

Answer

A care fees plan is a pre-funded insurance policy bought in advance of needing care. An immediate needs annuity (care annuity) is purchased once care is already required, using a lump sum from savings or assets.

Question 4

Under the Care Act 2014 in England, what is the local authority's primary duty regarding individuals who need care?

Accepted Answer

To assess the care needs of any adult who appears to need care or support and to meet eligible needs

Answer

The Care Act 2014 established a duty on local authorities to assess the care needs of all adults who appear to need care or support, and to meet needs that meet the national eligibility criteria, regardless of finances (though means-testing applies to funding).

Question 5

A 70-year-old client has £200,000 in savings and is considering long-term care planning. Which of the following would you most likely recommend as a planning strategy?

Accepted Answer

Consider a combination of self-funding and an immediate needs annuity purchased if and when care is needed

Answer

For a 70-year-old with significant assets above the self-funding threshold, a common strategy is to use savings initially (self-fund) and purchase an immediate needs annuity if and when care is actually needed, providing certainty of lifetime funding at that point.

CII R05 Practice Test

CII R05 Practice Test

CII R05 Long-Term Care Insurance 2