Chartered Life Underwriter (CLU) Health, Disability, and Long-Term Care Insurance Syllabus

Health, Disability, and Long-Term Care Insurance syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Health, Disability, and Long-Term Care Insurance in Chartered Life Underwriter (CLU), not a summary of it.

1. 1

   Disability Income Insurance

   4 topics

   • Definitions of Disability
     • Own-occupation versus any-occupation
     • Residual and partial disability
   • Policy Provisions and Benefit Design
     • Elimination and benefit periods
     • Cost-of-living and future increase options
   • Taxation of Disability Benefits
     • Individual versus employer-paid premiums
   • Business Disability Coverage
     • Business overhead expense insurance
     • Disability buy-out coverage
2. 2

   Medical Expense and Health Coverage

   4 topics

   • Individual and Group Medical Plans
     • HMOs, PPOs, and high-deductible plans
     • Cost-sharing structures
   • Health Savings Accounts and Consumer-Driven Plans
     • Eligibility and contribution limits
     • Qualified distributions
   • Affordable Care Act Provisions
     • Essential health benefits and exchanges
   • COBRA and Continuation Coverage
3. 3

   Long-Term Care Insurance

   4 topics

   • Long-Term Care Risk and Need
     • Activities of daily living triggers
     • Cognitive impairment triggers
   • Policy Features and Benefit Structures
     • Daily benefit and benefit period
     • Inflation protection options
   • Tax-Qualified LTC Contracts
     • Premium deductibility limits
     • Benefit taxation
   • Hybrid and Combination Products
     • Life and LTC linked-benefit policies
     • Annuity-LTC combinations
4. 4

   Medicare and Senior Health Planning

   3 topics

   • Medicare Parts A and B
     • Coverage and cost-sharing
     • Enrollment periods and penalties
   • Medicare Advantage and Part D
   • Medicare Supplement (Medigap) Policies
     • Standardized plan letters
     • Guaranteed-issue rights

Health, Disability, and Long-Term Care Insurance flashcards for Chartered Life Underwriter (CLU)

25 of 51 cards from the Health, Disability, and Long-Term Care Insurance deck — real questions with worked answers.

1. In a disability income policy, what does an "own-occupation" (own-occ) definition of total disability require?

   The insured is considered totally disabled if unable to perform the material and substantial duties of their OWN occupation, even if able to work in another job. It is the most liberal (favorable) definition.

2. How does an "any-occupation" definition of total disability differ from own-occupation?

   "Any-occupation" pays benefits only if the insured cannot perform the duties of ANY occupation for which they are reasonably suited by education, training, or experience. It is stricter (less favorable) and cheaper.

3. What is a "split definition" (also called "modified own-occ") of disability?

   It uses own-occupation for an initial period (e.g., first 2 years), then switches to an any-occupation standard for the remainder of the benefit period.

4. What is the elimination (waiting) period in a disability income policy?

   The time between the onset of disability and when benefits begin to accrue; it functions as a time deductible. Common periods are 30, 60, 90, or 180 days. Longer elimination periods lower the premium.

5. Define "residual disability" benefits in a DI policy.

   Residual benefits pay a partial benefit when the insured can work but suffers a loss of income (typically 20%+ income loss) due to a disability; the benefit is proportional to the percentage of income lost.

6. What is "presumptive disability" in a disability income policy?

   A provision that automatically deems the insured totally disabled (full benefits, often with no elimination period) upon certain losses, such as loss of sight in both eyes, hearing, speech, or use of two limbs.

7. In DI policies, what is the difference between "noncancelable" and "guaranteed renewable"?

   Noncancelable: insurer cannot cancel, raise premiums, or change terms to the stated age. Guaranteed renewable: insurer must renew but CAN raise premiums for an entire class of insureds (not individually).

8. What does a Cost-of-Living Adjustment (COLA) rider do in a DI policy?

   It increases the monthly benefit during a claim (after disability begins) to keep pace with inflation, typically tied to the CPI, protecting the purchasing power of benefits over a long claim.

9. What does a Future Increase Option (FIO)/Guaranteed Insurability rider do in DI?

   It lets the insured increase the monthly benefit amount in the future as income rises, without evidence of medical insurability (financial proof of income still required).

10. Are benefits from an individually-owned disability income policy paid with after-tax premiums taxable?

    No. When the individual pays premiums with after-tax dollars, the disability benefits received are income-tax-free.

11. How are disability income benefits taxed when the employer pays the premiums?

    If the employer pays premiums and does not include them in the employee's income, the disability benefits received are fully taxable to the employee.

12. In a group DI plan, if the employer pays 60% of the premium and the employee pays 40% with after-tax dollars, how are benefits taxed?

    Benefits are taxed proportionally: 60% of the benefit (employer-paid share) is taxable, and 40% (employee after-tax share) is tax-free.

13. What is a business overhead expense (BOE) disability policy and how are its benefits taxed?

    BOE reimburses a disabled business owner for fixed business expenses (rent, utilities, employee salaries) while disabled. Premiums are tax-deductible as a business expense, and benefits are taxable (but offset by deductible expenses).

14. What is the purpose of a disability buy-sell policy?

    It funds a buy-sell agreement by providing money for the healthy owners (or business) to buy out a permanently disabled owner's interest. Premiums are not deductible, and benefits are received income-tax-free.

15. What is "key person" disability insurance?

    Coverage owned by and payable to the business to offset losses from the disability of a key employee. Premiums are not deductible; benefits are received tax-free by the business.

16. Distinguish an HMO from a PPO in managed care.

    HMO: requires a primary care physician (PCP) gatekeeper, restricts coverage to in-network providers, lower cost. PPO: no PCP required, allows out-of-network care at higher cost-sharing, more flexibility/higher premium.

17. What is a coinsurance provision in a medical plan, and how does it relate to the out-of-pocket maximum?

    Coinsurance is the percentage of covered costs the insured pays after the deductible (e.g., 80/20 = plan pays 80%, insured 20%). The out-of-pocket maximum caps the insured's total annual cost-sharing, after which the plan pays 100%.

18. What are the four "metal" tiers of ACA marketplace plans and their actuarial values?

    Bronze (~60%), Silver (~70%), Gold (~80%), Platinum (~90%). The actuarial value is the percentage of total covered costs the plan pays on average.

19. What are the three eligibility requirements to contribute to a Health Savings Account (HSA)?

    (1) Be covered by a qualified High-Deductible Health Plan (HDHP), (2) have no other disqualifying coverage, and (3) not be enrolled in Medicare and not be claimed as a dependent on another's return.

20. How are HSA contributions, growth, and qualified withdrawals taxed (the "triple tax advantage")?

    Contributions are tax-deductible (or pre-tax), earnings grow tax-deferred, and withdrawals for qualified medical expenses are tax-free.

21. What is the tax penalty for non-qualified HSA withdrawals, and when does it stop applying?

    Non-qualified withdrawals are taxed as ordinary income plus a 20% penalty. The 20% penalty no longer applies after age 65, death, or disability (though ordinary income tax still applies if not used for medical expenses).

22. How does a Health Reimbursement Arrangement (HRA) differ from an HSA in ownership and funding?

    An HRA is employer-owned and employer-funded only (employees cannot contribute), and is generally not portable. An HSA is employee-owned, portable, and can be funded by both employee and employer.

23. How does a Flexible Spending Account (FSA) differ from an HSA regarding the "use-it-or-lose-it" rule?

    FSA funds are generally forfeited at year-end (subject to a limited carryover or grace period) and are not portable. HSA funds roll over indefinitely and are owned by the employee.

24. Under the ACA, what is guaranteed issue and what limits exist on premium rating?

    Insurers must offer coverage regardless of health status (guaranteed issue) and cannot use health/gender to set rates. Premiums may vary only by age (3:1 ratio max), geographic area, family size, and tobacco use (1.5:1 max).

25. Under the ACA, until what age may dependent children remain on a parent's health plan?

    Until age 26, regardless of marital status, financial dependency, student status, or residence.

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Planning Health, Disability, and Long-Term Care Insurance for Chartered Life Underwriter (CLU)

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