Long-term care insurance, defined by Washington state law, refers to an insurance policy, contract, or rider that offers coverage for a minimum of 12 consecutive months to an insured individual facing a debilitating long-lasting illness or disability. Typically, long-term care insurance covers various services when provided outside of a hospital intensive care unit. These services include diagnosis, preventive care, therapeutic treatments, rehabilitation, maintenance, and personal care.
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The benefits of long-term care insurance kick in when the insured person becomes unable to independently perform two or more activities of daily living (ADLs). These activities may include bathing, using the bathroom, eating, dressing, transferring (such as getting up from a chair or bed), and controlling bladder or bowel movements (continence).
Some life insurance and annuity policies may offer long-term care insurance as a rider. However, it’s important to note that not all life insurance policy riders qualify as long-term care insurance in Washington state, as defined by RCW 48.83.020 (leg.wa.gov). To ensure you’re purchasing legitimate long-term care insurance, refer to the list of approved companies authorized to sell long-term care insurance in Washington state.
If you have any questions about the benefits or exemptions related to the new Wacares fund, which was established as part of the long-term services and supports trust law, you can visit the Wacares fund website (wacaresfund.wa.gov).
What Clauses Count as Long-Term Care Insurance?
According to the Office of the Insurance Commissioner (OIC), long-term care riders attached to life insurance or annuity policies are considered a form of long-term care insurance if they meet specific benefit requirements.
To qualify as long-term care insurance in Washington state, a long-term care rider must provide a dedicated benefit that covers long-term care services. If the rider specifies that benefits are solely for long-term care services, rather than a lump sum or discretionary payments, it may be deemed limited liability insurance. Consequently, it will be subject to the same requirements as other limited liability insurance products regulated by the OIC.
Long-term care insurance also encompasses “qualified” long-term care insurance riders for life insurance policies. These riders, also known as federal tax-qualified long-term care insurance riders, meet the requirements outlined in sections 7702b(b) and (e) of the Internal Revenue Code of 1986, as amended.
What Clauses Do Not Qualify as Long-Term Care Insurance?
An accelerated death benefit rider found in some life insurance policies does not qualify as limited liability insurance. This rider allows the death benefit of a life insurance policy to be phased out and converted into cash payments following a terminal illness diagnosis. For an accelerated death benefit to be considered long-term care insurance, it must meet all the standards expected of long-term care insurance and explicitly refer to long-term care services in the rider’s name. For example, a “death benefit acceleration for qualified long-term care services.”
Another common rider called a critical illness rider does not meet the legal definition of limited liability insurance in Washington state. Similar to an accelerated death benefit rider, a critical illness rider converts the policy or contract value into cash payments if the insured person is diagnosed with a chronic illness.
These two types of riders, referred to as “accelerated benefits” in accordance with WAC 284-23-620 (leg.wa.gov), do not qualify as limited liability insurance products according to the OIC. The primary reason is that the benefits are paid to policyholders without the requirement to use the funds for long-term care services. Under Washington state law, accelerated benefits cannot be sold or advertised as long-term care insurance.
Still Unsure If Your Policy Qualifies as Limited Liability Insurance?
If you’re uncertain whether your policy or contract meets the criteria for limited liability insurance, reach out to your insurance provider. They will be able to confirm whether the product you have purchased or wish to purchase complies with the Washington Insurance Code (title 48) (leg.wa.gov), the Washington Administrative Code (title 284) (leg.wa.gov), and is approved by the OIC or Interstate Insurance Products Regulatory Commission (IIPRC).
Riders filed with the IIPRC under the “Accelerated Individual Standards for Death Benefits” (ACCDB) are not considered long-term care insurance products, whereas riders filed under the “uniform standards of individual long-term care (iltc)” are recognized as long-term care insurance products.