Which statement accurately distinguishes between qualified and non-qualified LTC policies?

The distinction between qualified and non-qualified long-term care (LTC) policies lies primarily in how they treat tax implications for premiums and benefits. Qualified policies are designed to meet specific criteria set by the Internal Revenue Code, which allows policyholders to enjoy certain tax advantages. Specifically, the premiums paid for qualified LTC policies can be deducted as medical expenses under certain conditions, making these premiums tax-deductible. Moreover, the benefits received from these policies when claimed are generally not taxed as income, which increases the attractiveness of these policies for consumers seeking tax-efficient options for long-term care.

In contrast, non-qualified LTC policies do not adhere to these specific requirements, which means that premiums paid for such policies are typically not deductible. Additionally, the benefits derived from non-qualified policies may be considered taxable as income, leading to a less favorable tax situation for the policyholder when they begin to utilize the benefits.

This understanding is crucial for agents and clients alike, as selecting the right type of policy can have significant financial implications, especially in regard to tax liabilities.