Difference between LTC Riders and a Qualified LTC Plan

August 13, 2015

c5a83c_4bacb2a4688c49368500a76274780568Many Life Insurance policies and even Annuity Policies, have what are called Long-Term Care Riders. They also have other names for these riders, such as: Critical Illness Rider, Long-Term Disability Rider or Accelerated Death Benefit Rider. These riders can be useful and may benefit some more than others, however, this does not qualify as a qualified long-term care plan and should not be treated as such.

A federally tax-qualified long-term care insurance contract must meet the requirements of Section 7702B of the IRS Code. The NAIC Long-Term Care Insurance Act of 2009, was put in place to protect applicatants for long-term care insurance, from unfiar sales or enrollment practices.

Things NAIC Standards did for policies we see today:

  • All policies are triggered by not being able to perform 2 or more of the 6 ADL’s (Activities of Daily Living) or a diagnoses of a cognitive impairment.
  • Defined qualified long-term care services.

Keep in mind, the old policies didn’t have these standards so some policies:

  • would require that 3 or 4 ADL’s could not be performed before benefits were able to be accessed.
  • have home care exclusions or be facility only policies or would cover only certain illnesses.

These things that we saw with old policies are what make the Long-Term Care Riders different than a qualified long-term care plan.

Things to look for in your “long-term care rider”

  • What triggers the benefits?
  • What services you can use the benefits for?
  • What will the benefit amount be? (Some policies will only give a percentage for services)

As with any insurance contract, you need to know what is covered. If you have a client or know someone that has a current long-term care policy, have them reach out to us. We review policies free of charge so they can know what coverage they currently have.

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