OVERVIEW
Q: What is Long Term Care?
A: Long term care is the type of ongoing assistance and/or
supervision people need when they are unable to perform
normal daily activities on their own, such as bathing, dressing,
eating, toileting, or getting in and out of bed or, when they
are severely cognitively impaired. The need for long term care
can arise from an accident or illness as well as the normal
aging process.
Q: Doesn’t health insurance or Medicare help cover
the cost of long term care?
A: Health insurance or Medicare can help pay for the cost
of immediate medical expenses, such as a surgeon’s bill,
or even some short-term rehabilitative care associated with a
surgery or accident. However, in most cases, long term care
costs are not covered under a health insurance plan
or Medicare.
Q: Does receipt of LTC Rider benefits affect eligibility
for Medicaid?
A: Under U.S. Department of Health and Human Services
policy, the policy owner cannot be forced to collect
accelerated benefits from his/her life insurance policy before
qualifying for Medicaid. But if the owner chooses to receive
accelerated benefits, that money could be considered
income, which might affect his/her Medicaid eligibility.
Benefits from the LTC Rider are payable to the owner of the
policy. The policy will not be included in the Medicaid asset
base of the insured if the insured does not own any fraction of
the policy. That said, Medicaid planning is complex, and there
is a long look back period for asset transfers made to become
eligible for Medicaid. The evaluation of a particular individual’s
Medicaid eligibility ultimately requires a legal opinion, which
can only be provided by an attorney.
Available on: TransNavigator
SM
IUL, Transamerica Journey
SM
VUL
and Transamerica Journey
SM
NY VUL life insurance products.
For producer use only. Not for distribution with the public.
» Overview
» The Long Term Care (LTC) Rider
» Benefits Eligibility
» Long Term Care Benefits
» Agency Licensing and Contracting
» Illustrations
» Underwriting
» Policy Changes
» Claims Guidelines
» Tax-Related Questions
Table of Contents
Long Term Care Rider
FREQUENTLY ASKED QUESTIONS
Long Term Care Rider F.A.Q.s
THE LONG TERM CARE (LTC) RIDER
The Long Term Care Rider or LTC Rider, available
on select Transamerica life insurance policies, is
designed to provide clients with a safeguard against
the financial burden of long term care. The LTC Rider
coverage can give clients the ability to help:
» Maintain their family’s standard of living
» Preserve their spouse’s financial
security and independence
» Manage long term care costs
» Choose how and where to receive care
Q: How does the LTC Rider work?
A: The LTC Rider provides an acceleration of the death
benefit to help pay for costs involved with long term
care. Excess accelerated benefit payments not needed
for long term care may be used for any expense, not
just those directly related to LTC costs. The payments
under the rider may not cover all the costs incurred
with long term care.
Q: What type of LTC Rider plan does
Transamerica offer?
A: The benefits of the Long Term Care Rider on
select Transamerica life insurance policies are payable
on an indemnity basis rather than a reimbursement
basis. This means that LTC benefits will be paid
by Transamerica without regard to the actual dollar
amount of LTC expenses incurred. We will, however,
require evidence of receipt of qualified LTC services
during the elimination* period and each month during
the benefit period.
Q: Can a client choose to buy a Transamerica
life insurance policy without the LTC Rider?
A: Yes, the LTC Rider is optional.
Q: Can the LTC Rider be added to a
Transamerica life insurance policy after it has
been issued?
A: No, the rider may only be added at issue for states
in which the rider is currently approved.
Q: Can other riders be attached to a Transamerica
life insurance base policy?
A: No other optional riders can be selected in
conjunction with the LTC Rider.
Q: Will Transamerica LTC Rider charges
increase in the future?
A: Although current and guaranteed monthly rider
charges increase by attained age, the current table
of rates will only be changed if we change rates for
all insureds of the same age, sex and risk class. Any
increase in monthly rider charges is guaranteed not to
exceed the table of maximum rates shown in
the contract.
For information on rider charges for the Transamerica
LTC Rider, please refer to the Transamerica LTC
Producer Guide (OL 3200).
Q: What is the maximum face amount on a
Transamerica life insurance policy with the
LTC Rider?
A: The maximum face amount on a certain selected
Transamerica life insurance policy with the LTC Rider
is $1,000,000. A separate Transamerica life insurance
policy must be submitted if the policy owner requires
a death benefit greater than $1,000,000. The separate
policy will not have the LTC Rider.
Q: Can the face amount on a Transamerica
life insurance policy be different than the LTC
Specified Amount?
A: No. The LTC Specified Amount always equals
the base Transamerica life insurance policy
face amount.
Q: Where can long term care be obtained?
A: The monthly benefit payments will help take care
of qualifying costs, including costs associated with:
» Long Term Care Facility Confinement
» Home Health Care Services
» Home Care Services
» Adult Day Care in an Adult Day Care Center
» Hospice Care by a Hospice Care Provider
» Respite Care
Q: Can a policy with the LTC Rider be
purchased in a qualified plan (defined
benefit plan)?
A: Generally, no. There are many types of qualified
plans, but the most frequently used defined benefit
plan (or pension plan) will not be permitted to
purchase a policy with the LTC Rider. This is due to
the restrictions on non-retirement benefits in such a
plan, which must be incidental to the primary purpose
* Named Eligibility Period in the State of New York.
of providing retirement income. The IRS has provided
extensive guidance on the amount of life insurance
which will be considered an incidental benefit, but
long term care or other health related services are not
permitted as incidental benefits. Defined contribution
retirement plans are subject to this same restriction.
For other types of qualified plans, Transamerica will
review on a case-by-case basis. However, there may be
tax implications. Please consult a personal taxadvisor
for more information on how this may affect the policy
owner based on his or her specific situation. Chronic
illness / long term care coverage under a qualified long
term care rider is treated as an acceleration of death
benefit. Because it is an acceleration of death benefit, it
is generally income tax-free.
BENEFITS ELIGIBILITY
Q: How does an insured become eligible to
receive LTC benefits?
A: To be initially eligible for benefits, the following
conditions must be satisfied:
a. The insured must be certified as a Chronically
Ill Individual;
b. There must be a Plan of Care for the insured;
c. Proof of loss must be documented; and
d. The elimination period* must be satisfied.
Q: How is an individual certified as
Chronically Ill?
A: An individual is certified as Chronically Ill by a
Licensed Health Care Practitioner when the individual:
a. Is unable to perform, without substantial
assistance from another individual, at least two
out of the six activities of daily living (ADLs) —
bathing, continence, dressing, eating, toileting,
transferring—for an expected period of at least
90 days due to a loss of functional capacity; or
b. Has a severe cognitive impairment that requires
substantial supervision to protect the individual
from threats to health and safety.
Q: Is there a waiting period before the policy
owner may be eligible to receive benefit
payouts under the LTC Rider?
A: Yes, a waiting period (elimination period) of
90 separate days must be satisfied. This is the number
of days during which the insured otherwise qualifies
as a Chronically Ill individual, receives qualifying long
term care services, and has incurred expenses for
those services. Benefits are not payable during the
elimination period. The elimination period need only be
satisfied once. In New York, the eligibility period must
be met within a period of 180 days and benefits are
paid retroactively. Please see the LTC Guide (OL 3200)
for complete details.
Q: Does the LTC Rider cover LTC services
received outside of the United States?
A: Transamerica’s Long Term Care Rider does NOT
cover qualified long term care services received outside
the 50 United States, District of Columbia or Canada.
LONG TERM CARE BENEFITS
Q: What is the maximum monthly
benefit amount?
A: The maximum monthly long term care benefit
payout for any calendar month will be equal to the
lesser of “a” or “b” where:
a. 2% of the Long Term Care Specified Amount, at
commencement of benefits; or
b. the HIPAA per diem amount times the number of
days in the calendar month
Q: What is the current HIPAA per diem amount?
A: The 2015 HIPAA per diem amount is $330
(i.e., approximately $9,900 per month).
Q: Can an insured take less than the maximum
monthly benefit?
A: Yes. If the insured does not require the entire
maximum monthly benefit amount, the policy owner
can elect to take an amount between the maximum
allowable benefit and the minimum monthly benefit
of $500.
Q: Does the LTC Rider cover services rendered
by a family member/unlicensed person for
home care services?
A: LTC services performed by a family member are
not covered unless the family member provides the
service in the capacity of a regular employee of an
organization that is engaged in providing the LTC
service. The organization must receive payment for the
service and the family member must receive normal
compensation from the employer/organization for
performing the service.
Long Term Care Rider F.A.Q.s
* Named Eligibility Period in the State of New York.
Long Term Care Rider F.A.Q.s
Q: Once the LTC Rider benefit amount is
selected, can the policy owner request a
different amount?
A: Yes. Once the LTC Rider benefit amount is
selected, it will remain in effect for the remainder of
the current calendar year. The policy owner can change
his or her election for subsequent calendar years by
giving us written notice at least 30 days before the
beginning of that calendar year.
AGENT LICENSING AND
CONTRACTING
Q: Do I need a health license and long term
care CE training in order to sell the LTC Rider?
A: Varies by state. Most states require a health license
and CE training to sell the LTC Rider.
Q: Do I need a health license if I am not
selling the LTC Rider?
A: No, if you are only selling Transamerica insurance
policies you need a life license from the state where
the sale is made, and for VUL policies be licensed as a
Registered Representative by FINRA.
ILLUSTRATIONS
Q: How do I select and illustrate the LTC Rider
on a Transamerica life insurance policy?
A: The option to select the LTC Rider will appear in the
“Riders” section of the Transware
®
Illustration system
software. If selected, the LTC Rider will be included in
the life insurance policy illustration.
Q: Can LTC Rider benefit hypothetical
scenarios be illustrated on Transware?
A: Yes. Transware will allow illustrations of
hypothetical LTC benefit scenarios and will
appear in an LTC supplemental report (subject to
state availability).
UNDERWRITING
Q: What is the underwriting process for the
LTC Rider?
A: The base policy and the LTC Rider will each
be underwritten and are subject to separate
underwriting approval.
Q: Is the LTC Rider information included within
the base product application (U322 0613T)?
A: No. A LTC Rider supplemental application is
required. “Supplemental Application for LTC Rider”
(ICC12 LTC 0312T or LTC 0312T)
Q: Are any other forms required for
the LTC Rider other than the
Supplemental Application?
A: Yes. HIPAA Authorization (form ICC12 HIP1011)
is also required with the base product application and
supplemental application.
Q: What other requirements (if any) are
necessary to fully underwrite the LTC Rider?
A: In addition to the underwriting evidence for a
Transamerica life insurance policy, depending on
the age of the proposed insured, we will also obtain
information regarding the proposed insured’s health
status and LTC Rider underwriting risk class from a
telephone interview, cognitive screen, prescription
benefit manager report and Face-to-Face Assessment.
Q: Can an applicant receive an offer for a
Transamerica life insurance policy and be
declined for the LTC Rider?
A: Yes. The applicant can be declined for LTC Rider
coverage if the proposed insured has a condition that is
considered a high risk for loss of the ability to perform
normal activities of daily living, or loss of cognitive
ability.
POLICY CHANGES
Q: Can the policy owner voluntarily terminate
the LTC Rider after the policy has been issued?
A: Yes. The LTC Rider can be terminated at any time
after the policy has been issued. All LTC Rider charges
will stop at the time of termination.
Q: Can the policy owner request face amount
changes if there is an LTC Rider attached to
the policy?
A: Increases in the face amount of the policy or the
LTC Specified Amount are not allowed except for
those that occur with a death benefit option change.
Decreases are allowed but we will not allow face
reductions below $100,000*.
* Face amount may not be reduced below $112,500 in Vermont and $150,000 in South Dakota
CLAIMS GUIDELINES
Q: Are premiums required while the insured
is on claim?
A: Premiums are not required while the insured is on
claim. We will not charge monthly charges for this rider
for any policy month while rider benefits are being paid.
However, other policy charges will continue to apply.
Q: Can the policy lapse while on claim?
A: No. While the insured is on claim, the policy will not
lapse due to insufficient Cash Surrender Value.
Q: What happens when the entire LTC benefit
amount has been paid?
A: No further LTC Rider benefits will be payable and
no further rider monthly charges will be taken. A
residual death benefit, however, may be payable. The
residual death benefit, which is provided by a separate
endorsement, is the lesser of: (a) 10% of the lowest
face amount of the base policy from its inception, less
any outstanding policy loans, or
(b) $10,000.
Q: What kind of evidence is required at the
time of claim?
A: The claims process begins when we receive
a notice of claim. Upon receipt of notice of claim
from the policy owner, we will send out a claims
packet (claim forms) which must be completed and
returned to us. The company will then schedule a
face-to-face assessment of the insured to assess the
insured’s need for services in order to determine the
insured’s eligibility for LTC Rider benefits. In addition,
the policy owner must provide us with written proof
of loss (“evidence”). Written proof of loss means
information or documents satisfactory to us to enable
us to determine whether benefits are payable under
the rider. Such proof includes: (1) a certification by a
licensed health care practitioner (doctor, registered
nurse or licensed social worker) that the insured is
a chronically ill individual (ADL deficient or severely
cognitively impaired); (2) documentation (e.g. receipts)
to show that the insured received qualified long term
care services and incurred a charge for those services
during the elimination period and for each month that
the insured claims benefits; and (3) a copy of the plan
of care which is a written comprehensive assessment
of the insured’s physical and cognitive abilities,
and specifies the type, frequency and providers
of all the services that the insured requires. Other
documentation may also be required, such as, medical
records, physician’s order, or other claim forms.
TAX-RELATED QUESTIONS
Q: What are the income tax consequences
of receiving benefit payments under the
LTC Rider?
A: The LTC Rider is intended to provide a federally tax-
qualified benefit under IRC Sec. 101 and Sec. 7702B.
As such, receipt of LTC benefits should not create
income tax liability so long as the benefits are under
the HIPAA per diem limits, except for certain business
related policies under Sec. 101(g).
Q: If the insured receives an amount greater
than the HIPAA per diem amount, will the LTC
Rider benefits be subject to income taxation?
A: LTC benefits received in excess of the HIPAA
per diem limit are generally taxable to the extent the
LTC benefits exceed the greater of the per diem limit
and the actual unreimbursed LTC expenses incurred.
All contracts covering the same insured are combined
with the per diem limit allocated first to the insured.
The combined benefits paid under multiple policies
may exceed the HIPAA per diem amount and the
excess will be treated as taxable income.
Q: Can an existing life insurance policy be
exchanged for a life insurance policy with an
attached LTC Rider through a 1035 exchange?
A: Yes, an existing policy, whether or not it is a
Modified Endowment Contract (MEC), can be 1035
exchanged to a new life insurance policy with the
LTC Rider.
Q: Can an irrevocable life insurance trust (ILIT)
hold a life insurance policy with the LTC Rider?
A: Yes. However, the LTC benefits will be paid to the
trust and the terms of the trust must be consulted
regarding use of the benefits to pay the insured’s
LTC expenses. For example, the ILIT may have a
provision to allow early or special distributions to ILIT
beneficiaries before the death of the grantor.
Q: Are LTC Rider premiums/charges
deductible as a medical expense?
A: No. Under IRC Section 7702B(e)(2), LTC Rider
charges (which are not treated as a taxable distribution
of cash value inside a life insurance policy) are not
allowed an IRC Section 213(a) medical expense
deduction for premiums/rider charges paid. A medical
expense deduction is not allowed for any payment
made for coverage under a qualified LTC insurance
contract if the payment is made as a charge against the
cash value of a life insurance policy.
Long Term Care Rider F.A.Q.s
The Long Term Care Rider is available on the TransNavigator
SM
index universal life insurance policy and the Transamerica Journey
SM
variable universal life insurance policy (named Transamerica Journey
SM
NY in New York). Life insurance products issued by Transamerica
Life Insurance Company, Cedar Rapids, IA, or Transamerica Financial Life Insurance Company, Harrison, NY. All products may not be
available in all jurisdictions. Transamerica Financial Life Insurance Company is authorized to conduct business in New York. Transamerica
Life Insurance Company is authorized to conduct business in all other states.
Long Term Care rider Forms LTCR03, ICC12 LTCR03, and LTCR03 CA are underwritten by Transamerica Life Insurance Company. Rider Form
LTCR03 NY is underwritten by Transamerica Financial Life Insurance Company. Rider form numbers, availability, provisions and benefits may
vary by state.
For producer use only. Not for distribution with the public.
OL 3205 0515
Long Term Care Rider F.A.Q.s
