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Long-term care insurance policies may be purchased on an individual basis, much like other individual health insurance policies. An individual policy provides benefits to a single individual and is issued based upon individual underwriting considerations.
Long-term care insurance may be purchased on a group basis, either at an insured's place of employment or as a member of an association. Group LTC policies must provide the insured, who would otherwise lose their coverage, with the right to continue or convert the LTC coverage into an individual policy without proof of insurability.
A long-term care insurance policy meets the definition of a qualified long-term care insurance contract if all of the following are present:
Only products that meet the Qualified LTC definitions are eligible to be marketed as Partnership LTC plans.
| Topic | Qualified | Nonqualified |
|---|---|---|
| Premiums | Can be included with other annual uncompensated medical expenses for deductions from income | May or may not be deductible by the insured |
| Benefits | Generally will not be counted as income. | May or may not count as income. |
| Benefit trigger | Federal law requires an insured be unable to perform 2 ADLs without substantial assistance | Benefit triggers are not restricted to 2 ADLs |
| Medical necessity | Cannot be used as a trigger for benefits | Can be offered as benefit triggers |
| Chronic illness or disability | Must be expected to last for at least 90 days | No requirement for 90-day period |
| Cognitive impairment | A person must require substantial supervision to trigger coverage | No restrictions on coverage |
Qualified vs. Nonqualified LTC Plans
An alternative to purchasing an LTC insurance policy is an agreement by a life insurance company, known as living benefits, to advance a life insurance policy benefits rider. Living benefit riders agree to pay a part of the policy death benefit to insureds in order to pay for long term care or nursing home care, should the need arise. The rider will generally stipulate the conditions under which the benefit is triggered (attaining age 65 to 85, etc.). The advance is treated as a lien against death benefit of the policy.