Minnesota Life Insurance License Practice Exam

What is TRUE regarding the suitability of a long-term care insurance policy?

1. The policy must be affordable for the client

2. The agent must have reasonable grounds for believing the recommendation is suitable for the customer

3. The client must have a prior insurance history

4. The policy must have a waiting period

The correct answer is: The agent must have reasonable grounds for believing the recommendation is suitable for the customer

The suitability of a long-term care insurance policy is fundamentally about ensuring that the recommendation made aligns with the specific needs and circumstances of the customer. It is crucial for the agent to conduct a thorough assessment of the client’s financial situation, health status, and preferences when recommending a long-term care policy. This responsibility adheres to a standard of care that requires the agent to have reasonable grounds for believing that the policy being suggested is in the best interest of the client. This means that the agent must evaluate whether the client's current financial resources can support the premiums of the policy, whether the benefits of the policy align with potential future needs, and if the coverage will provide suitable protection against the risk of needing long-term care. The agent's recommendation must take into account all relevant factors to ensure it serves the client’s best interests rather than solely aiming for a sale. While affordability is an important consideration, it is only one part of a broader assessment. A prior insurance history and a waiting period can also play roles in the overall evaluation, but they are not definitive criteria that determine suitability in the same way that the agent's evaluation and belief in the policy's suitability for the client are.