9.7 Long-Term Care Insurance

To qualify for benefits to begin in most long-term care policies, you must be unable to do how many ADL?

• one or more

• two or more

• three or more

• four or more

An elimination period is:

• the period between the beginning of long-term care benefits and the policy termination

• the maximum benefit period associated with a long-term care policy

• the period between the start of premium payments and for care

• the amount of time you must wait for long-term care insurance benefits to begin

If Micala needs long-term care services at age 70 and the cost of care at the time is $350 per day, how much will she need in savings to cover a 180-day elimination period (assuming a 360-billing cycle)?

• $31,500

• $63,000

• $75,600

• $126,000

Answer explanation

$350 daily charge X 180 days =

What maximum benefit limit should Abed choose if he expect the cost of long-term care coverage to be $200 per day and he anticipates needing long-term care of 3 years (assuming a 360-day billing cycle)?

• $72,000

• $144,000

• $216,000

• $360,000

Answer explanation

$200 per day X 360 days X 3 years =

A long-term care policy issued by Athens Insurance Underwriters, Inc. pays a maximum daily benefit of $175 or 80% of the actual daily cost, whichever is higher. How much will Ramone need to pay in out-of-pocket costs if he purchases the policy with a 60-day elimination period, assuming that the first year's cost of care is $81,000 (and assuming a 360-day billing cycle)?

• $10,500

• $10,800

• $13,500

• $27,000

Answer explanation

Daily cost of care is $81,000 / 360 days = $225 / day. First multiply this by 60 days, $225 X 60  = $13,500. Then look at the maximum daily benefit covered, higher of $175 or 80% of $225 ($225 X 0.80 = $180), use $180 for the insurance coverage for each day. Uncovered daily cost of care is $225 - $180 = $45 per day. Cost for the first 60 days is $13,500. Cost for the next 300 days is $45 X 300 = $13,500. Cost for the whole year (360 days) is $13,500 + $13,500 =

A long-term care policy issued by Athens Insurance Underwriters, Inc. pays a maximum daily benefit of $175 or 80% of the actual daily cost, whichever is higher. How much will Ramone receive in daily benefits from the long-term care insurance policy if he uses the services of a nursing home that has an annual cost of care is $63,000 (and assuming a 360-day billing cycle)?

• $175

• $180

• $195

• $225

Answer explanation

Annual cost of $63,000 divided by 360 days, $63,000 / 360 =

The cost of a nursing home care in a community is $70,000 per year. If a nursing home uses a 360-day billing cycle, how much much will someone need to pay for services if the long-term care insurance policy has a 100-day elimination period?

• $17,500

• $19,444

• $24,500

• $35,000

Answer explanation

Daily cost is the annual cost divided by 360 days, or $70,000 / 360 = $194.44  per day. Cost of the 100 day elimination period is 100 days X $194.44 per day =

round your answer to the nearest dollar

What risk does Sarah run if she chooses a long-term care policy with a short benefit period of 2 years?

• the elimination need will be quite large

• the cost of the policy will be higher than those with a longer benefit period

• if she needs care beyond 2 years, she will need to fund these costs from her own savings or investment

• the elimination need will be quite large and, if she needs care beyond 2 years, she will need to fund these costs from her own savings and investments

Micala is contemplating how she is going to pay for long-term care services if she ever needs help with ADL in the future. Currently, Micala is age 42. Should she purchase a long-term care insurance policy now?

• yes, because the risks associated with ADL is just as high at age 42 as it is at age 62

• no, because the risk of needing long-term care insurance benefits is very low now

• yes, because she can lock in a low elimination period because of her age

• no, because the benefit periods available to someone her age are too low

What costs more?

• One year’s in-state tuition, fees, room and board at a public university.

• One year of nursing home care.