Competency 15 Section 4

Question 1

1. There is little variation in hybrid long-term care insurance product offerings as every company essentially offers one market standardized product.

Answer 1

False. There is a great deal of variation and options in the hybrid-long term care insurance product market. (LO 15-4-1)

Question 2

2. The Pension Protection Act of 2006 severely limited the tax benefits of hybrid long-term care insurance products.

Answer 2

False. The PPA increased the tax benefits available for hybrid long-term care insurance products. (LO 15-4-1)

Question 3

3. Premiums paid for a hybrid annuity/long-term care insurance product can be deducted as an itemized health care cost for federal taxes.

Answer 3

False. The premiums paid from the hybrid policy are subtracted from the basis and not taxed as a distribution. However, the premiums are not tax deductible. (LO 15-4-1)

Question 4

4. Hybrid long-term care products can help ease the “use it or lose it” concern that many individuals have with long-term care insurance premiums.

Answer 4

True. (LO 15-4-1)

Question 5

5. Hybrid long-term care insurance products tend to be fixed and not variable returns

Answer 5

True. (LO 15-4-1)

Question 6

6. A hybrid long-term care insurance policy might not have as robust of long-term care benefits compared to a similar priced long-term care insurance policy because the hybrid product is trying to accomplish multiple tasks at once

Answer 6

True. (LO 15-4-1)

Question 7

7. Most hybrid long-term care insurance policies are life-time pay premiums.

Answer 7

False. Most hybrid long-term care insurance policies are single pay premiums. (LO 15-4-1)

Question 8

8. Hybrid long-term care insurance policies are easier to create and more beneficial for couples than for an individual

Answer 8

False. The hybrid policies require single lump sums and often do not have spousal benefits or discounts. These products can be difficult to coordinate for couples. (LO 15-4-1)

Question 9

9. Life-insurance/long-term care hybrids can provide an early-death benefit, triggered by the need for long-term care.

Answer 9

True. (LO 15-4-1)

Question 10

10.Life-insurance/long-term care hybrid products typically require less stringent medical underwriting than a long-term care insurance policy because the individual is purchasing two types of policies.

Answer 10

False. Typically the underwriting is the same or more strict. (LO 15-4-1)

Question 11

11.Long-term care benefits paid out of qualified life-insurance/LTC hybrid products are paid tax free.

Answer 11

True. (LO 15-4-1)

Question 12

12.Variable annuity/LTC hybrid products are not available.

Answer 12

False. While they are not commonly used, they are available. (LO 15-4-1)

Question 13

13.An existing annuity can be 1035 exchanged directly to an insurance company to pay for a long-term care insurance policy without paying taxes on the gains.

Answer 13

True. (LO 15-4-1)

Question 14

14.An existing annuity can be 1035 exchanged for a life-insurance/LTC hybrid policy without the gains being taxed at the time of the exchange

Answer 14

False. Just as a 1035 exchange of an annuity to life insurance policy is not allowed, a 1035 exchange of an annuity/LTC hybrid to a life insurance/LTC hybrid is not allowed. (LO 15-4-1)

Question 15

54. Which of the following statements regarding annuity-LTC hybrid products is (are) correct? (LO 15-4-1)
    I. Variable annuity-LTC hybrid products are currently unavailable.
    II. Underwriting requirements for annuity-LTC hybrid products are stricter than for a life insurance/LTC hybrid product.
    A. I only
    B. II only
    C. Both I and II
    D. Neither I nor II

Answer 15

54. The answer is D. Statement I is incorrect. Most hybrid products are fixed annuities but some are variable. Statement II is incorrect as the opposite is true.