Inflation Protection
With health care costs rising to new heights every year, buying a policy without inflation protection is probably buying a policy that won't cover much of your expenses. There are two main kinds of inflation protection: the right to add coverage at a later date; and automatic coverage increases that adjust for COLA (cost-of-living-adjustments)

Non-Forfeiture Benefit
Policies with this benefit will continue to pay for your care even if you stop paying premiums. This policy feature can add 10 percent to 100 percent to your premium.

Free-Look Clause
This provision lets you cancel your policy within a certain number of days after you've signed and paid for it. Applicants need to check with their state insurance commission to find out how many days are allowed- typical is 10, 20 or 30 days.

Waiver of Premium
This waiver allows the policy owner after a specified period of time of receiving benefits under the policy, to apply to have their premium payments waived until they are no longer receiving covered care or the lifetime maximum benefit has been paid.

Practice Question:
Which provision of a "qualified" long-term care policy is required under HIPAA?
A. Inflation protection
B. Surrender value
C. Guaranteed renewable
D. Fixed benefit

Answer: C
Under the Health Insurance Portability and Accountability Act (HIPAA), for policies issued after January 1, 1997- the contract must be "guaranteed renewable" in order to maintain federal "qualified" status.

Limits for a "Qualified Policy"
In order for a policy to receive favorable tax treatment, it must conform to certain standards & guidelines as set forth by the Internal Revenue Code and HIPAA. They must contain language to address the following:

  • Policy must be Guaranteed Renewable
  • Prohibitions on limits and exclusions
  • Policy replacement
  • Policy conversion
  • Cannot require prior hospital stay for benefits
  • Contract cannot only provide skilled nursing care coverage
  • Requirement to offer inflation-adjusted benefits
  • Proper marketing standards
  • Suitability of the recommended purchase
  • Must be a two-year incontestable clause for misrepresentation
Taxation of Premiums and Benefits

Related Articles
  1. Insurance

    6 Long-Term Care Insurance Mistakes to Avoid

    To get the most out of your long-term care insurance, avoid making these mistakes.
  2. Financial Advisor

    Advising FAs: Explaining Life Insurance to a Client

    Life insurance was initially designed to protect the income of families, particularly young families in the wealth accumulation phase, in the event of the head of household's death.
  3. Financial Advisor

    Long-Term Care Policies: Why They're Worth It

    Long-term care insurance can be a godsend for those who need it for an extended period of time. Read on for more about this long-term care option.
  4. Financial Advisor

    Considerations For Long-Term Care Coverage

    Medical and financial health determine whether long-term care insurance will pay off.
  5. Insurance

    Long-Term Care Insurance: What You Need to Know

    Planning ahead for long-term care costs should be part of a financial plan.
  6. Insurance

    Is Loan Protection Insurance Right For You?

    This coverage can keep you from defaulting on your loans when you're in financial trouble.
  7. Insurance

    Does Buying a Guaranteed Life Insurance Policy Make Sense?

    When does it make sense to buy a life insurance policy that is guaranteed?
  8. Financial Advisor

    7 Issues to Consider When Determining Life Insurance Coverage

    Seven issues to consider when buying life insurance to ensure the coverage is tailored to meet your personal financial situation.
Frequently Asked Questions
  1. What's considered to be a good debt-to-income (DTI) ratio?

    Your debt-to-income ratio helps lenders determine your credit worthiness. Find out how to calculate your score and how to ...
  2. What is the difference between a loan and a line of credit?

    Learn to differentiate between lines of credit and standard loans, and determine when you are likely to use each method of ...
  3. What does a Chief Financial Officer (CFO) do?

    A CFO is responsible for accurate reporting of a company's financial information, investing the company's money and identifying ...
  4. How did George Soros break the Bank of England?

    George Soros pocketed $1 billion by betting against the British pound, cementing his reputation as the premier currency speculator ...
Trading Center