Disability & Long-Term CareQuestion 101 of 716
Compared with a non-tax-qualified long-term care policy, a federally tax-qualified LTC policy:
a.Is illegal to sell in California because the federal HIPAA rules preempt the state's approval of any LTC policy form
b.Provides favorable tax treatment of premiums and benefits but follows the stricter HIPAA benefit-trigger rules
c.Pays only nursing-home confinement benefits under HIPAA and covers no home care, adult day care, or assisted-living services
d.Has looser benefit triggers but forfeits all federal tax advantages, because its policy form is never filed with the IRS for approval
Explanation
A tax-qualified LTC policy follows the federal HIPAA standards, including the 2-of-6-ADL trigger and severe-cognitive-impairment trigger, and in return receives favorable federal tax treatment of premiums and benefits. Non-tax-qualified policies may have more flexible triggers but lose the tax advantages.
Law Reference: HIPAA §7702B; IRC §7702BThis topic, taught in full in the California Life & Health Insurance Producer Exam guide. California Life & Health Insurance Producer Exam — Complete Study Guide (2026) — PDF + EPUB, $19.99 · 14-day refund →
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Related questions on this topic
- What inflation protection must a California LTC insurer offer to each applicant for a new individual long-term care policy?
- In California, a long-term care policy may NOT exclude a pre-existing condition for more than how long after the policy's effective date?
- The MAIN consumer benefit of buying a California Partnership for Long-Term Care policy, rather than an ordinary LTC policy, is:
- Which definition of total disability is MOST favorable to the insured during the ENTIRE benefit period?
- Under a California tax-qualified long-term care insurance policy, benefits are triggered when the insured cannot perform without substantial assistance how many of the six Activities of Daily Living (ADLs)?
- Under California's Long-Term Care Insurance Reform Act, what inflation protection must an insurer offer (but not necessarily mandate) to applicants for an individual LTC policy?
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PrepPass team · Verified against California Life & Health Insurance License Exam · How we review
Reviewed by John Zihao Zhang — California-Licensed Life Insurance Agent (CA Dept. of Insurance License #4396095 — verify)