Today's topic: distinguishing between tax qualified and non tax qualified long term care insurance plans.

Tax Qualified vs. Non- Tax Qualified Long Term Care Insurance 

For this illustration, there are different types of long term care insurance policies. First, there are the Non-Tax Qualified (NTQ) policy, plans which used to be called Traditional Long Term Care insurance.  These types of LTC have been sold for over 30 years. So, how do they work?  Well, this policy is triggered by the patient’s doctor or doctor in conjunction with someone from the insurance company. The taxability of these benefits is open for interpretation and is still in question.  At LTCtree, we do not sell "NTQ" LTC.  Enough of the abbreviations, let's continue.

Tax Qualified: Activities of Daily Living 

The more modern policies and the only plans provided by the major carriers we offer are called Tax Qualified (TQ) policies.  They have many features but primarily do not have a Medical Necessity trigger. The ability to collect benefits may be triggered when a person is unable to perform 2 specified activities without assistance for at least 90 days. These activities may include eating, dressing, bathing, transferring, and continence. The doctor, or in some cases the insurance company, may also provide a “Plan of Care”. These payments or benefits are non-taxable.

Disclaimer: There are many complicated tax issues involved in some of the packages, and it is advisable you seek advice before choosing the plan that suits your needs. There may also be some local laws concerning restrictions on benefits in the tax qualified policies.