There are two types of long term care policies, Tax Qualified and Non-Tax Qualified
Tax qualified (TQ) policies are most common and policies’ benefits are not taxable. TQ policies require that a doctor provide a plan of care and that a person:
- be expected to require care for at least 90 days, and be unable to perform 2 or more daily activities (eating, dressing, bathing, etc) without assistance; or
- for at least 90 days, need substantial assistance due to a severe cognitive impairment.
Non-tax qualified (NTQ) policies are the traditional Long Term Care insurance policies. The patient's own doctor and/or the insurance company can “trigger” payment by stating that the patient needs care. Unlike TQ policies, NTQ policies require that the insured be unable to perform just one daily activity (including walking) to receive benefits. These benefits can be taxed.
Once secured, Long Term Care Insurance policies cannot be changed or canceled for health reasons.
Individual companies offer several premium payment options as well as benefits packages. As with many insurance products, it is prudent to shop around.