Long Term Care Certification Practice Test

What happens if a long-term care policy has a return of premium feature?

1. The total amount paid in premiums is returned

2. A refund occurs if the insured chooses to cancel

3. A percentage of the paid premiums is returned if the insured dies or policy lapses

4. No refunds are given under any circumstances

The correct answer is: A percentage of the paid premiums is returned if the insured dies or policy lapses

The correct answer emphasizes the nature of the return of premium feature in a long-term care policy. This feature typically entails that a percentage of the premiums paid can be returned to the policyholder if specific events occur, such as the insured's death or if the policy lapses. This characteristic is structured to provide some financial benefit to the policyholder or their beneficiaries, ensuring that not all premium payments are lost if the need for care does not materialize or if circumstances change. The option regarding the total amount of premiums being returned isn't accurate because, under typical return of premium arrangements, it is usually a percentage rather than the full amount that is returned. The choice suggesting a refund occurs only if the insured chooses to cancel does not capture the full scope of the feature, which also applies in cases like the insured's death. Lastly, the option stating that no refunds are given contradicts the definition of the return of premium feature, which is designed to provide some refund under certain conditions.