LONG TERM CARE 6
Policies sold as federally tax qualified long-term care insurance
use a standard of eligibility for benefits that may be stricter
than the standards established in California for non-qualified
policies. It may be easier to qualify for benefits from non-tax
qualified policies that use the standards established by California.
However, the premiums for these non-tax qualified policies
cannot be deducted and federal law is unclear on the tax treatment
of the benefits paid. If you have questions about the tax
status of a policy you own or one you are considering buying,
your qualified long-term care insurance agent can advise you.
If you have specific questions pertaining to how the purchase
of tax qualified long-term care insurance will impact the
deductions you take or the taxes you pay, you should talk
to your tax advisor to see how it will affect your individual
taxes. Note: All long-term care policies that were issued
prior to January 1, 1997 automatically qualify as federally
tax qualified policies.
These pre-1997 issued policies are "grandfathered"
- i.e. they qualify for the same tax treatment of premiums
and benefits paid as new policies issued after 1997 that are
federally tax qualified. These policies do not have to be
replaced with a new tax qualified policy in order for the
premiums to be tax deductible. In fact, you should be quite
careful when considering changing or replacing any long-term
care insurance policy issued prior to January 1, 1997 because
you may lose the policy’s grandfathered status and you will
have to meet a stricter standard to qualify for benefits.
Consult your agent, insurance company or tax advisor for more
information.
Individual vs. Group Insurance
An individual long-term care insurance policy is a contract
between you and the insurer. These policies must be approved
by the California Department of Insurance (CDI) and have all
of the consumer protections required under California law.
Individual policies are “guaranteed renewable” and cannot
be canceled by the insurance company unless the premium is
not paid on time. However, every company has the right to
increase the premiums it charges with proper notification
and approval from the Department of Insurance.
Group long-term care insurance is a contract between an insurer
and a group, such as an employer on behalf of its employees,
or a trade or professional association on behalf of its members.
If you are covered under a group plan, you receive a “certificate”
rather than a “policy” of insurance. Also, many of the policy
terms have already been negotiated by the group, and the group
(called the “master policyholder”) has the option to terminate
the policy at any time. Often, but not always, group insurance
is less expensive than individual insurance. If group coverage
is terminated, you have the right to continue the coverage
or buy a conversion policy, depending on the provisions of
the policy and other factors. If you purchase group coverage,
ask about what options will be available to you if the group
cancels the policy or if you lose your membership or eligibility.
Be sure to ask if the premiums will change, and ask how you
will be notified.
Note:
If you are considering buying group insurance,
investigate the sponsoring group. Be sure the group is negotiating
in your interest. Some group policies do not have to be approved
by the California Department of Insurance, although the company
is required to send information about the policy to the Department
for its records. The master policy can be cancelled by the
carrier or the sponsoring group.
California Department of Insurance
Protecting California Consumers
Toll Free 800-927-HELP
Long Term Insurance 1
Long Term Insurance 2
Long Term Insurance 3
Long Term Insurance 4
Long Term Insurance 5
Long Term Insurance 6
Long Term Insurance 7
Long Term Insurance 8
Long Term Insurance 9
Long Term Insurance 10
Long Term Insurance 11
Long Term Insurance 12
Long Term Insurance 13
Long Term Insurance 14
Long Term Insurance 15
Long Term Insurance 16
Long Term Insurance 17
Long Term Insurance 18
Long Term Insurance 19
Long Term Insurance 20
