Long Term Care Certification Practice Test

Which combination of long-term care insurance policy features is likely to have the lowest premium?

1. A 30-day elimination period and a 5-year benefit period

2. A 100-day elimination period and a 3-year benefit period

3. A 60-day elimination period and a 1-year benefit period

4. A 90-day elimination period and a 10-year benefit period

The correct answer is: A 100-day elimination period and a 3-year benefit period

The combination of a 100-day elimination period and a 3-year benefit period is likely to have the lowest premium due to the way long-term care insurance pricing works. The elimination period refers to the initial waiting period before benefits begin, and a longer elimination period typically results in lower premiums because the insurer is not liable for claims during that time. In this instance, a 100-day elimination period means that the policyholder will need to pay out-of-pocket for care costs for a longer duration before the insurance coverage starts, thus reducing the insurer's risk and, consequently, the policy's cost. The benefit period indicates how long the insurer will provide coverage once claims are initiated. A 3-year benefit period is relatively shorter compared to options that extend to 5 or 10 years, which means the insurer might anticipate a lesser maximum payout for claims that could be made, further minimizing risk. By having a combination of both a long elimination period and a shorter benefit period, this policy consequently provides the potential for the lowest premium when compared to the alternatives. Other combinations present shorter elimination periods or longer benefit periods which would inherently drive up the costs, leading to higher premiums.