CRPC Long-Term Care Planning 4 — Questions and Answers
Question 1: A 68-year-old client with mild cognitive impairment wants to purchase long-term care insurance. Which underwriting outcome is most likely?
- Approved at standard rates
- Approved with a rider excluding cognitive conditions
- Declined or rated due to existing impairment (Correct answer)
- Approved only for facility care, not home care
Correct answer: Declined or rated due to existing impairment
Existing cognitive impairment is typically a basis for declination or significant rating by LTC insurers because it signals high near-term claim probability.
Question 2: Which provision in a long-term care insurance policy allows the insured to stop paying premiums if they involuntarily lapse due to cognitive impairment?
- Nonforfeiture benefit
- Waiver of premium
- Third-party notification (Correct answer)
- Contingent nonforfeiture
Correct answer: Third-party notification
Third-party notification provisions require the insurer to notify a designated person before lapsing a policy, protecting cognitively impaired policyholders.
Question 3: A hybrid long-term care product combines life insurance with an LTC rider. What happens to the death benefit if the insured uses LTC benefits?
- The death benefit is unaffected
- The death benefit increases to offset LTC costs
- The death benefit is reduced by the amount of LTC benefits paid (Correct answer)
- The policy is cancelled once LTC benefits begin
Correct answer: The death benefit is reduced by the amount of LTC benefits paid
In hybrid life/LTC policies, LTC benefit payments accelerate or reduce the death benefit on a dollar-for-dollar basis.
Question 4: Under the HIPAA standards for qualified LTC insurance, which of the following triggers qualifies a claimant for benefits?
- Inability to perform 3 of 6 ADLs for at least 30 days
- Inability to perform 2 of 6 ADLs for at least 90 days (Correct answer)
- Diagnosis of any chronic illness lasting more than 60 days
- Physician certification of need for skilled nursing care
Correct answer: Inability to perform 2 of 6 ADLs for at least 90 days
HIPAA requires inability to perform at least 2 of 6 ADLs expected to last at least 90 days as a qualifying trigger for tax-advantaged LTC benefits.
Question 5: Which of the following best describes the 'shared care' rider available on some LTC insurance policies?
- A rider that splits premium costs between spouses equally
- A rider allowing spouses to access each other's unused benefit pool (Correct answer)
- A provision requiring both spouses to file claims simultaneously
- A discount applied when two unrelated individuals purchase policies together
Correct answer: A rider allowing spouses to access each other's unused benefit pool
A shared care rider lets one spouse tap the other's remaining benefit pool if their own benefits are exhausted, effectively doubling coverage for the couple.
Question 6: A client asks about using a Medicaid planning strategy involving gifting assets to qualify for LTC coverage sooner. What is the primary risk of this approach?
- The IRS will impose gift taxes on transferred assets
- Medicaid's look-back period can trigger a penalty period of ineligibility (Correct answer)
- The client will permanently lose eligibility for Medicare Part A
- Assets transferred to spouses are counted double by Medicaid
Correct answer: Medicaid's look-back period can trigger a penalty period of ineligibility
Medicaid's 5-year look-back period reviews asset transfers and imposes ineligibility penalties proportional to the value of improperly gifted assets.
Question 7: Which long-term care setting typically provides the highest level of medical oversight while also being the most expensive form of care?
- Adult day care center
- Assisted living facility
- Skilled nursing facility (Correct answer)
- Continuing care retirement community (CCRC)
Correct answer: Skilled nursing facility
Skilled nursing facilities provide 24-hour medical supervision from licensed nurses and are generally the most costly LTC setting.
CRPC Long-Term Care Planning 4
A 68-year-old client with mild cognitive impairment wants to purchase long-term care insurance.
Which underwriting outcome is most likely?