What Is The Difference
Between Qualified
And Non Qualified
Long Term Care Insurance?
The question “What is the difference between qualified and non qualified long term care insurance?” is a head scratcher for many of us.
The mystery of long term care insurance deepens as we try to make sense of it and realize that it is a multi-faceted protection that requires the help of a professional in the field to clarify many of the points.
Tax Breaks For Qualified
Long Term Care Insurance
Qualified long term care insurance gives you the benefit of being able to claim the premiums you pay as a tax deduction, up to a certain yearly amount, based on your age.
These expenses fall into medical expenses, which can only be deducted if they surpass 7.5% of your adjusted gross income for the tax year.
In addition, if you receive benefits from qualified long term care insurance, they are not considered income, therefore are tax-free.
No Tax Breaks For Non Qualified
Long Term Care Insurance
Non qualified long term care insurance means that there is no tax break coming your way for the premiums you are paying out on your long term care insurance policy. In addition, should you need to reap benefits from the policy, you would again have no tax breaks.
Your benefits might be taxable, which would take away from their real world benefit. With all these negatives, why would anyone even consider a non qualified long term care insurance policy?
One reason is that the triggers the insurance company looks for before paying out tend to be less stringent with this policy than with qualified policies.
Ease of Getting Benefits
The major difference in regards to coverage between qualified and non qualified long term care insurance is the ease with which you can start benefits pay out. With a non qualified policy, as soon as a doctor determines that you are unable to do certain activities of daily living without any help whatsoever, you will begin receiving benefits. If you have a qualified policy, you must be unable to perform activities of daily living for at least ninety days before receiving benefits.
If your claim is based on cognitive impairment, a non qualified long term care policy will kick in as soon as your doctor deems it necessary. If your policy is a qualified one, you must show your doctor that you need “substantial supervision” before your coverage begins to pay benefits.
Non qualified long term care insurance only became available as of January 1, 1997. All policies prior to that date are automatically considered qualified. It is easy to determine whether your policy is qualified or not. There should be a statement written on the policy itself stating that it is a qualified long term care insurance contract. If the statement is not present, your policy must be non qualified.
Considerations
As with all aspects of purchasing long term care insurance, whether you choose to buy a qualified or non qualified policy is just another option in a long line of things to consider before deciding on the best policy for you.
Given the pros and cons of the differences in these types of policies, you’ll want to give this the same consideration you would give to determining how long your elimination period should be, or what daily coverage limit you should carry, or how many years of coverage you should take out.
These tax considerations are merely another detail of the complex world that is long term care insurance. Asking what is the difference between qualified and non qualified long term care insurance is relevant to making an educated decision on this type of insurance, as is getting efficient and accurate quotes from several companies.
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