Question

Harriet has purchased a long-term insurance policy with a 3-month elimination period and an 80% benefit limit. If she is expecting her long-term care costs to be $120,000 a year, how much of these costs will she need to cover herself in her first year of care?

a. $48,000
b. $24,000
c. $96,000
d. $120,000

Answer 1

To determine how much Harriet will need to cover herself in her first year of long-term care, calculate the elimination period and benefit limit. Harriet will need to cover $78,000 of her first year long-term care costs herself.

Step-by-step explanation:

To determine how much of her long-term care costs Harriet will need to cover herself in her first year of care, we need to calculate the 3-month elimination period and the 80% benefit limit.

The 3-month elimination period means that Harriet will have to pay for the first 3 months of care out of pocket. Since she is expecting her long-term care costs to be $120,000 a year, Harriet will need to cover $30,000 (3 months of care) on her own during the first year.

After the elimination period, Harriet's insurance policy will cover 80% of her long-term care costs. So, for the remaining 9 months of the first year, the insurance will cover $72,000. Therefore, Harriet will need to cover $30,000 + $48,000 = $78,000 of her first year long-term care costs herself.