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Comparison of Tax-Qualified and Non-Qualified Long Term Care Policies

 

Tax-Qualified

 

Non-Tax Qualified

PRO

CON

 

PRO

CON
If you itemize deductions on your individual income tax return, premiums up to a maximum amount adjusted for inflation can be included with other annual uncompensated medical expenses. Total medical deductions must exceed 7.5% of adjusted gross income.

Only a small percentage of consumers with catastrophic health-care costs can qualify for the deduction of premiums.

    

No deduction of any part of the premiums.
Benefits that you may receive will not be counted as income.       Currently, benefits are not taxable. However, the U.S. Dept. of Treasury has not yet ruled on whether benefits that you may receive count as taxable income. If the benefits become taxable, the insurance company will issue Form l099.
  Benefit triggers may be more restrictive than those which may be allowed in Non-Tax Qualified policies. Federal law requires you be unable to do 2 of 5 out of 6 possible ADLs without substantial assistance.  

Benefit triggers may be less restrictive. A person needs only standby or occasional assistance for ADLs.

 
 

“Medical necessity” cannot be used as a trigger for benefits.

  

“Medical necessity” and/or other measures of disability can be offered as benefit triggers.

  
 

Disability must be expected to last for at least 90 days.

   No requirement that disability be expected to last for at least 90 days.  
  For cognitive impairment to be covered, a person must require substantial supervision.   Policies do not have to require substantial supervision to trigger benefits for cognitive impairment.  

This chart is derived and expanded from information published by the National Association of Insurance Commissioners, Shopper’s Guide to Long-Term Care Insurance.

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Last modified: 11/04/07