What Is Qualified Long-Term Care Insurance?
Whether a long-term care insurance plan is "qualified" refers only to its tax treatment. Beginning in 1997, Congress created a way to grant tax-favored status to premiums and benefits covered under long-term care policies.
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History
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Any long-term care policy bought before 1997 that met state standards was extended tax-qualified status. Policies bought after Jan. 1, 1997, had to meet federal guidelines to be tax-qualified.
Care Requirements
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Qualified long-term care plans require that you need care for at least 90 days, and you must meet at least one of two requirements: be unable to perform at least two of the six activities of daily living covered in the legislation and/or need substantial assistance because of cognitive disabilities. In either case, a doctor must provide the care plan.
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Advantages
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Qualified plan premiums can be included as an itemized tax deduction, and benefits will not be taxed.
Disadvantages
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The time constraint, as well as the lack of a medical necessity trigger eliminate rehabilitative care -- after surgery or an accident, for example -- as a benefit in qualified long-term care policies.
Cost
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Qualified plans typically carry lower premiums than non-qualified policies, based on comparable daily benefits.
Buying Tip
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Many companies have discontinued offering non-qualified plans. Before buying, specify which type of plan you prefer.
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