Long Term Care Certification Practice Test

Which of the following would result in the lowest premium for a long-term care policy?

1. A 120-day elimination period and a 3-year benefit period

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

3. A 90-day elimination period and a lifetime benefit period

4. A 180-day elimination period and a 2-year benefit period

The correct answer is: A 120-day elimination period and a 3-year benefit period

When considering long-term care insurance, the premium a policyholder will pay is significantly influenced by the terms of the policy regarding elimination periods and benefit durations. A policy with a longer elimination period typically results in lower premiums. The elimination period refers to the amount of time the insured must wait after becoming eligible for benefits before the insurance starts to pay. Therefore, options with a longer elimination period usually mean that the insured will be responsible for more out-of-pocket expenses at the beginning of their care, which reduces the insurer's risk and consequently the premium. In the given choices, a 120-day elimination period stands out as relatively long. While the 3-year benefit period is not the lowest among the options, having a balance of a longer elimination period helps keep the premium lower overall. In contrast, shorter elimination periods like 30 days or even options with lifetime benefits generally increase the premium. Policies with lower elimination periods shift more risk to the insurer because they start paying sooner, leading to higher premiums due to increased coverage costs. Thus, the combination of a 120-day elimination period and a 3-year benefit period is advantageous, ensuring that the premium remains as low as possible relative to the other options presented.