Individual and group long-term care insurance

Correct answer: Preparing meals

The six ADLs are eating, toileting, transferring, bathing, dressing, and continence. Preparing meals is an instrumental task of daily living, not one of the six ADLs.

Correct answer: Yes, because she cannot perform two activities of daily living for a period expected to last at least 90 days

A chronically ill individual is one certified as unable to perform at least 2 ADLs, without substantial assistance, for at least 90 days due to loss of functional capacity. Bathing and dressing are both ADLs, and six months exceeds 90 days.

Correct answer: Custodial care

Custodial care is help with activities of daily living, which can be given by people without medical training. It is the care most long-term care claimants need.

Correct answer: After he has received 90 days of covered care

The elimination period is a waiting period before benefits begin, counted in days as the policy defines them, either calendar days or days on which covered care is received. Because Martin receives covered care every day from March 1, under either method his benefits begin after he has received 90 days of covered care.

Correct answer: Choosing a longer elimination period

A longer elimination period means the insured bears more of the early cost of care, so the insurer charges less. The daily benefit amount is unchanged.

Correct answer: The insured requires substantial supervision to protect against threats to health and safety

A chronically ill individual includes one certified as requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment.

Correct answer: $200

An indemnity, or per diem, policy pays the stated daily amount regardless of the actual cost of care, so it pays $200.

Correct answer: It must be guaranteed renewable

One of the requirements for a qualified long-term care insurance contract is that the contract is guaranteed renewable.

Correct answer: Short-term care that gives a family caregiver a break

Respite care is short-term care that relieves an unpaid family caregiver for a time.

Correct answer: Within the preceding 12 months

An individual is not a chronically ill individual unless, within the preceding 12-month period, a licensed health care practitioner has certified that the individual meets the requirements.

Correct answer: Group coverage is issued as a master policy to an employer or association, and covered members receive certificates

Group long-term care is issued to the group as a master policy, and members receive certificates of coverage. Individual policies are owned by the insured.

Correct answer: As if the portion providing long-term care coverage were a separate contract

For long-term care coverage provided by a rider on, or as part of, a life insurance or annuity contract, the tax rules apply as if the portion providing that coverage were a separate contract.

Correct answer: As amounts received for personal injuries and sickness, treated as reimbursement for medical care

Amounts received under a qualified long-term care insurance contract, other than dividends or premium refunds, are treated as amounts received for personal injuries and sickness and as reimbursement for medical care expenses actually incurred.

Correct answer: Skilled nursing care

Skilled nursing care is daily care ordered by a physician and given by licensed medical staff such as registered nurses or therapists.

Correct answer: A cash surrender value that can be borrowed or pledged as collateral

A qualified long-term care insurance contract may not provide for a cash surrender value or other money that can be paid, assigned, pledged as collateral for a loan, or borrowed.

Correct answer: To reduce future premiums or to increase future benefits

All refunds of premiums and all policyholder dividends under a qualified contract must be applied as a reduction in future premiums or to increase future benefits. The only exception is a refund on the death of the insured or on a complete surrender or cancellation of the contract, which cannot exceed the aggregate premiums paid; it does not cover dividends.

Correct answer: Raise premiums for an entire class of policyholders

On a guaranteed renewable policy the insurer cannot cancel the insured or raise one person's rate, but it can raise rates for a whole class.

Correct answer: No, because the loss of ability must be expected to last at least 90 days

The insured must be unable to perform at least 2 ADLs for a period of at least 90 days due to a loss of functional capacity. An expected 30-day recovery does not meet that period.

Correct answer: Adult day care

Adult day care provides care in a community setting during the day, while the insured lives at home.

Correct answer: The excess over the greater of the daily limit or the actual cost of care is includible in gross income

Periodic payments exceeding the per diem limitation are includible in gross income. The limitation is the greater of the indexed dollar amount or the costs actually incurred for qualified long-term care services, less other reimbursements.

Correct answer: A reimbursement policy pays actual expenses up to the daily limit, while an indemnity policy pays the stated daily amount regardless of cost

A reimbursement policy pays actual expenses up to the daily limit. An indemnity, or per diem, policy pays the stated daily amount regardless of the actual cost.

Correct answer: To pay for extended care caused by chronic illness, disability, or cognitive impairment, and to protect savings

Long-term care insurance pays for help with daily living needed over a long period because of chronic illness, disability, or cognitive impairment, filling the gap left by health insurance and Medicare and protecting savings.

Correct answer: A physician, a registered professional nurse, or a licensed social worker

A licensed health care practitioner means any physician and any registered professional nurse, licensed social worker, or other individual who meets requirements prescribed by the Secretary.

Correct answer: Medicaid has strict income and asset limits, so insurance helps protect her savings

Medicaid pays for long-term care, but it is means-tested: a person must meet strict income and countable-asset limits, which often means spending down savings first. Long-term care insurance helps pay for care while protecting those savings.

Correct answer: No, because the rule does not apply to expenses Medicare reimburses only as a secondary payer, and coordination with Medicare is permitted

A qualified contract generally may not pay expenses reimbursable under Medicare, but that rule does not apply to expenses Medicare reimburses only as a secondary payer, and a qualified contract may coordinate its benefits with Medicare.

Correct answer: A waiting period, measured in days, that must pass before benefits begin

The elimination period is a waiting period, measured in days, before benefits begin. The policy states whether those days are calendar days or only days on which covered care is received. It works like a deductible measured in time.

Correct answer: No, because a refund on death that cannot exceed the aggregate premiums paid is permitted

The rule that refunds must reduce future premiums or increase benefits does not apply to a refund on the death of the insured, or on a complete surrender or cancellation, which cannot exceed the aggregate premiums paid.

Correct answer: A 180-day elimination period and a 2-year benefit period

A longer elimination period and a shorter benefit period both reduce the insurer's expected payout, so they produce the lowest premium.

Correct answer: An accident and health insurance contract

A qualified long-term care insurance contract is treated as an accident and health insurance contract.

Correct answer: As medical care expenses, subject to age-based limits on the amount that counts

Amounts paid for a qualified long-term care insurance contract are treated as payments for insurance for medical care, so premiums count as medical expenses, subject to age-based limits.

Correct answer: An assisted living facility

Assisted living facilities combine a residence with help with activities of daily living and supervision, with less medical care than a nursing home.

Correct answer: Benefits depend on meeting a benefit trigger, such as certified loss of two activities of daily living or severe cognitive impairment, not on a diagnosis alone

Long-term care policies pay when the insured meets a benefit trigger. For a tax-qualified policy that means certification of inability to perform 2 of 6 ADLs for at least 90 days, or of severe cognitive impairment requiring substantial supervision.

Correct answer: As a qualified long-term care insurance contract

A State long-term care plan whose terms would satisfy the requirements for a qualified contract, were it an insurance contract, is treated as a qualified long-term care insurance contract.

Correct answer: Active employees are offered coverage with little or no underwriting, while spouses usually answer health questions

Actively working employees are often offered group long-term care with little or no underwriting, while spouses, parents, and retirees usually face more questions.

Correct answer: At least 5

A contract is not a qualified long-term care insurance contract unless its determination of chronic illness based on ADL loss takes into account at least 5 of the 6 activities of daily living.

Correct answer: No, no medical expense deduction is allowed for a charge taken from the policy's cash value

No deduction under the medical expense rules is allowed for any payment for qualified long-term care coverage made as a charge against the cash surrender value of a life insurance contract or the cash value of an annuity.