Insurance Planning - Chapter 7

What is the key factor in determining the need for long-term care? A. A disabling accident. B. An acute episode. C. Multiple chronic conditions. D. Inability to perform activities of daily living.

The correct answer is D. There are 6 ADLs. Being unable to perform 2 ADLs usually triggers long-term care insurance benefits.

An individual is trying to qualify for Medicaid by gifting away their assets. Assets they gift away in the past 60 months might still be considered countable assets because they were gifted away during the: A) Look-back period B) Elimination period C) Benefit period D) Qualifying period

The correct answer is (A). The purpose of the look-back period is to determine whether an individual only qualifies for Medicaid because they recently gave away assets. The look-back period is 60 months long.

Which of the following is correct regarding how employer payments for long-term care are treated for federal income tax purposes? Employer payments for long-term care group premiums are: A) deductible to the employer and not taxable income to the employee. B) deductible to the employer but are taxable income to the employee. C) not deductible to the employer and not taxable income to the employee. D) not deductible to the employer and are taxable income to the employee.

The correct answer is (A). Employer payments for long-term care group premiums are tax deductible to the employer and not taxable income to the employee.

Where do most people receive long-term care services? A) In their home B) In an assisted-living facility C) In skilled-nursing care D) In a hospital

The correct answer is (A). Most people receive long-term care in their home.

All of the following are requirements of a qualified long-term care insurance policy EXCEPT: A) The benefit of the policy must offer inflation protection. B) The contract must offer to cover preexisting conditions. C) The contract must be guaranteed renewable. D) The contract must offer to pay a non-forfeiture benefit.

The correct answer is (B). For a long-term care policy to be considered a qualified plan, the plan must be guaranteed renewable and offer inflation protection and a non-forfeiture benefit. The contract does not need to offer to cover preexisting conditions.

Tom, Richard, Jane, and Dorothy all live at the South Hampton Home for Distinguished Musicians. Which of these meet(s) the criteria for being chronically ill under qualified long-term care provisions? I. Tom, who cannot drive, hear, or dress himself. II. Richard, who cannot speak, feed himself, or dress himself. III. Jane, who cannot hear, walk, or feed herself. IV. Dorothy, who cannot drive, walk, or dress herself. A) Jane only B) Richard only C) Richard and Dorothy D) Tom and Jane

The correct answer is (B). The inability to feed and dress yourself without assistance are two of the listed tasks that constitute a chronically ill person under a qualified long-term care policy. Richard is the only one who qualifies as chronically ill.

An example of custodial or personal care would be: A. skilled-nursing care provided. B. assistance with activities of daily living (ADLs). C. making the terminally ill comfortable. D. individualized care.

The correct answer is (B). Custodial care is not medical care and is not meant for those who are terminal; its purpose is to assist with activities of daily living (ADLs).

There is more than one way to obtain benefits for nursing home coverage. All of the following sources provide some benefits, EXCEPT: A. LTC insurance B. Health insurance C. Medicare D. Medicaid

The correct answer is (B). Health insurance does not provide for this type of coverage. All of the other options provide benefits for nursing home coverage for some length of time.

Joshua has moved frequently during his life and now lives in Miami, Florida. He works as a bartender and owns a small home. He has spent most of the money he has made, and he continues to do so. Joshua's brother, Caleb, is very different. He finished graduate school and has saved as much as possible over the years. He owns a small business that he operates with his family. He is by no means rich, but he is certainly upper middle class. Which brother needs long-term care insurance? A. Joshua B. Caleb C. Both Joshua and Caleb D. Neither Joshua nor Caleb

The correct answer is (B). Joshua apparently has few assets to protect. Therefore he will likely qualify for Medicaid in the event he needs long-term care services. Caleb needs LTC insurance because he has accumulated enough assets to protect, but does not appear to be able to self-insure.

Which of the following is (are) required for an insured to qualify for long-term care benefits? I. The insured is unable to perform two of the six ADLs for at least 90 days. II. The insured has substantial cognitive impairment requiring substantial supervision for his or her protection. A) I only B) II only C) Either I or II D) Neither I nor II

The correct answer is (C). The insured must meet one of the two criteria (statement I or II) to be eligible for long-term care benefits.

A chronically ill person entitled to receive benefits under a long-term care policy is defined as someone who is unable to perform _____ activities of daily living for a period of at _____ least days. A) Four; 90 B) Two; 60 C) Two; 90 D) Three; 90

The correct answer is (C). Under a qualified long-term care policy, a chronically ill person must be unable to perform without the substantial assistance of another person two ADLs for 90 days.

Approximately what percent of people over the age of 65 will require long-term care services at some point in their lives? A. 50% B. 60% C. 70% D. 90%

The correct answer is (C). About 70 percent of persons over age 65 will require long-term care service at some point during their lives.

All of the following are considered activities of daily living (ADLs) EXCEPT: A) dressing. B) bathing. C) cognitive ability. D) transferring from a bed to a chair.

The correct answer is (C). The six ADLs are eating, bathing, dressing, transferring from a bed to a chair, using the toilet, and maintaining continence. Cognitive ability is not an ADL.

Janet is 83 years old and has been blind for 4 years. She is no longer able to drive or cook for herself. Assuming she has a qualified long-term care plan, is she considered chronically ill? A) Yes, she has been unable to perform two activities of daily living for over 90 days. B) Yes, but she must prove to the insurance company that she is unable to perform these tasks. C) No, sight is not considered an activity of daily living, although cooking is. D) No, cooking, and driving, and being able to see are not considered ADLs.

The correct answer is (D). Cooking, driving, and being able to see are not considered ADLs. The Health Insurance Portability and Accountability Act defines chronically ill as being unable to perform two of the six activities of daily living (ADLs). The six ADLs are eating, bathing, dressing, transferring from a bed to a chair, using the toilet, and maintaining continence.

Long-term care can be extremely expensive. Which of the following statements is (are) correct regarding the cost of long-term care? I. Medicare is a practical way to pay for long-term care. II. Most people who need long-term care will receive at least some financial assistance from Medicaid. A) I only B) II only C) Both I and II D) Neither I nor II

The correct answer is (D). Statement I is incorrect because Medicare is not a good option to pay for long-term care because it is limited and restrictive and will only pay for up to 100 days. Statement II is incorrect because only people who meet fairly strict income and asset tests qualify for Medicaid. While these tests vary somewhat by state, generally people must have nearly no income and very little assets to qualify for financial assistance from Medicaid.

All of the following are activities of daily living (ADLs) for long-term care purposes EXCEPT: A. Cooking B. Eating C. Transferring D. Dressing

The correct answer is A. Cooking is not an activity of daily living (ADL) for long-term care purposes. All other options are activities of daily living.

Which of the following is incorrect? A. Long-term care insurance is needed by everyone. B. Many people do not need long-term care insurance. C. Those with millions in net worth do not need long-term care insurance. D. Many people who need long-term care insurance do not have it.

The correct answer is A. Many people will qualify for Medicaid and thus do not need long-term care insurance.

If a long-term care contract is tax-qualified, that means: A. its premiums are deductible on income tax returns. B. its benefits are received income tax-free. C. it is offered by a state government. D. it is part of the Medicare system.

The correct answer is A. Tax-qualified implies that the long-term care insurance policy is treated as health insurance for federal income tax purposes and is therefore deductible on income tax returns. If long-term care insurance premiums are paid for by an employer, the employer may deduct the premium cost as an employee benefit. The employees will not be required to report the value received in their income for the year.

Today, many long-term care policies are treated as tax-qualified contracts. All of the following are true regarding tax-qualified long-term care contracts EXCEPT: A. Tax qualified long-term care policies must provide benefits that are limited to long-term care services. B. These policies can be provided under an employer-sponsored cafeteria plan. C. These policies allow employers to provide this benefit, take a current income tax deduction and allow the employee to avoid income inclusion. D. The premiums for these policies may be deductible either above the line or below the line.

The correct answer is B. These policies cannot be included in a cafeteria plan. All other statements are correct.

What is the primary function of long-term care insurance? A. To pay medical claims for the insured B. To provide reinsurance for health insurance policies C. To provide comprehensive health care coverage D. To protect against catastrophic long-term care risks

The correct answer is D. The primary function of long-term care insurance is to protect against the financial risks associated with the cost of long-term care services.