State RegulationsMI specificDifficulty 2/5
An insurer designs an individual LTC policy for sale in Michigan that is offered with no inflation protection option of any kind. Under Michigan's LTC requirements, what is the problem?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
M.C.L. 500.3909 requires that, at the purchase of an individual Michigan LTC policy, the applicant be offered an inflation protection option no less favorable than annual compounding at 5%, or an alternative such as a guaranteed periodic increase right without evidence of insurability or a benefit based on a percentage of actual charges. Omitting the offer entirely — whatever the premium level — violates the statute, and DIFS reviews policy forms and market conduct for exactly this kind of required-provision failure.
Why the other options are wrong
- B) Lower premiums cannot substitute for a statutorily required offer; the obligation is to offer the option, not to price around it.
- C) The age-banded requirements belong to the Partnership Program's inflation tiers; they do not exempt older applicants from the general offer rule.
- D) The offer requirement of M.C.L. 500.3909 reaches individual LTC policies generally, not only Partnership policies.
Memory hook
No inflation option, no sale: the offer itself is mandatory.