CRPC Long-Term Care Planning 5 — Questions and Answers
Question 1: A 72-year-old client already owns a traditional LTC policy purchased 10 years ago. She is concerned about a large premium increase. Which option does NOT typically require evidence of insurability?
- Purchasing a new standalone LTC policy
- Exchanging to a new policy via a 1035 exchange
- Invoking a contingent nonforfeiture benefit on the existing policy (Correct answer)
- Applying for a group LTC policy through an association
Correct answer: Invoking a contingent nonforfeiture benefit on the existing policy
Contingent nonforfeiture benefits are triggered by substantial premium increases and allow the insured to convert to a paid-up reduced benefit without new underwriting.
Question 2: For tax purposes, what is the maximum amount of LTC insurance premiums that a 65-year-old can include as a medical expense deduction in 2024?
- $1,790
- $2,800
- $4,710 (Correct answer)
- $5,880
Correct answer: $4,710
For 2024, the age-based deductible limit for LTC insurance premiums for individuals aged 61–70 is $4,710, subject to the 7.5% AGI floor.
Question 3: A couple entering a Continuing Care Retirement Community (CCRC) pays a large upfront entrance fee. Which contract type offers the greatest financial risk to the resident if the facility closes?
- Type A (Life Care) contract (Correct answer)
- Type B (Modified) contract
- Type C (Fee-for-Service) contract
- Month-to-month rental contract
Correct answer: Type A (Life Care) contract
Type A contracts require the largest entrance fees in exchange for unlimited care, so residents bear the greatest financial exposure if the facility becomes insolvent.
Question 4: Which of the following best describes the 'restoration of benefits' provision in an LTC insurance policy?
- Benefits are increased annually by the inflation protection percentage
- The benefit pool is fully restored if the insured recovers and makes no claims for a specified period (Correct answer)
- Premiums are waived after the elimination period is satisfied
- The insurer restores benefits denied due to a billing error
Correct answer: The benefit pool is fully restored if the insured recovers and makes no claims for a specified period
A restoration of benefits provision rebuilds the policy's benefit pool to its original amount if the insured recovers sufficiently and remains claim-free for a defined period (often 180 days).
Question 5: Which financing strategy is most appropriate for a client who wants to self-insure against LTC costs but has limited liquid assets?
- Establishing a dedicated LTC savings account funded with after-tax dollars
- Purchasing a deferred income annuity with an LTC doubler rider (Correct answer)
- Relying on Medicaid as the primary payer from day one
- Using a reverse mortgage as the sole LTC funding vehicle
Correct answer: Purchasing a deferred income annuity with an LTC doubler rider
A deferred income annuity with an LTC doubler rider provides a guaranteed income stream that doubles if the owner needs qualifying long-term care, addressing both longevity and care risk with moderate premiums.
Question 6: A client's LTC insurance policy has a 90-day elimination period with a 'calendar day' method. The client needs care 3 days per week. How long until benefits begin?
- 30 weeks (210 days of actual care days)
- 90 calendar days from the first day of qualifying care (Correct answer)
- 90 service days counting only days care was received
- Benefits begin immediately because fewer than 5 days per week are used
Correct answer: 90 calendar days from the first day of qualifying care
Under the calendar day method, the 90-day elimination period is satisfied after 90 consecutive calendar days from the onset of qualifying care, regardless of how often care is actually received.
Question 7: Which of the following is an advantage of Partnership Long-Term Care Insurance programs offered in most U.S. states?
- Premiums are fully deductible regardless of AGI
- Policyholders can protect assets from Medicaid equal to benefits paid under the policy (Correct answer)
- Partnership policies have no elimination period
- States guarantee policy benefits if the insurer becomes insolvent
Correct answer: Policyholders can protect assets from Medicaid equal to benefits paid under the policy
Partnership LTC policies include an asset disregard provision allowing policyholders to protect assets dollar-for-dollar equal to benefits received when applying for Medicaid.
CRPC Long-Term Care Planning 5
A 72-year-old client already owns a traditional LTC policy purchased 10 years ago.
She is concerned about a large premium increase.
Which option does NOT typically require evidence of insurability?