Long-term care (LTC) insurance, according to Washington state law (leg.wa.gov), is an insurance policy, contract or rider that provides coverage for at least 12 consecutive months to an insured person if they experience a debilitating prolonged illness or disability. LTC insurance typically covers the following types of services if they’re provided in a setting other than a hospital’s acute care unit:
- Personal care
LTC insurance typically pays benefits when an insured person can no longer independently do two or more of the following activities of daily living (ADLs):
- Go to the bathroom
- Transfer (such as getting out of a chair or bed)
- Control their bladder or bowels (continence)
LTC insurance may be included as a rider on some life insurance and annuity policies. However, some life insurance policy riders don’t qualify as long-term care insurance in our state according to the definition of LTC insurance as defined in RCW 48.83.020 (leg.wa.gov). See a list of companies approved to sell long-term care insurance in Washington state.
What riders qualify as long-term care insurance?
The Office of the Insurance Commissioner (OIC) considers long-term care riders to be a form of LTC insurance if they meet clearly defined benefit requirements.
To qualify as LTC in Washington state, a long-term care rider attached to a life insurance or annuity policy must pay a benefit dedicated to cover long-term care services. A rider that specifies its benefits pay for long-term care services, as opposed to a lump sum or payments to be used at the discretion of the insured, can be considered LTC insurance. As such, it will be subject to most of the same requirements the OIC applies to LTC insurance.
LTC insurance also includes “qualified” long-term care insurance riders to life insurance policies. These are also called federally tax-qualified long-term care insurance riders and they satisfy the requirements of sections 7702B(b) and (e) of the internal revenue code of 1986, as amended.
What riders do not qualify as long-term care insurance?
A type of rider found in some life insurance policies called an accelerated death benefit does not qualify as LTC insurance. An accelerated death benefit is when the death benefit of a life insurance policy is gradually reduced and converted to cash payments following the diagnosis of a terminal illness. For an accelerated death benefit to quality as LTC insurance, the rider must comply with all the long-term care regulations and will refer to long-term care services in the name of the rider. An example is an “Acceleration of Death Benefit for Qualified Long-Term Care Services.”
Another common type of rider known as a critical illness rider does not meet the statutory definition of LTC insurance in Washington state. Like an accelerated death benefit, a critical illness rider on a life insurance or annuity policy converts the value of a policy or contract to cash payments if an insured has been diagnosed with a chronic illness.
These two types of riders are known as “accelerated benefits,” as defined by WAC 284-23-620 (leg.wa.gov). Unlike LTC insurance, which requires the insured to no longer be able to perform two or more ADLs, accelerated benefits may be triggered after a single qualifying event. The OIC determined accelerated benefit riders and critical illness riders do not qualify as LTC insurance products. This is mainly because their benefits are paid to the insured without requiring the funds to be used for long-term care services. Under Washington state law, accelerated benefits cannot be sold or advertised as LTC insurance.
Still not sure if your policy or contract qualifies as LTC insurance?
Contact your insurance company to find out if the product you’ve bought or want to buy complies with the Washington Insurance Code (Title 48) (leg.wa.gov), Washington Administrative Code (Title 284) (leg.wa.gov) and is an approved company through the OIC or Insurance Interstate Product Regulation Commission (IIPRC).
Riders filed with the IIPRC under the “Individual Standards for Accelerated Death Benefits” (ACCDB) standards are not long-term care insurance products.
Riders filed with the IIPRC under “Individual Long Term Care (iLTC) Uniform Standards are long term care insurance products.