a) Renewability. Individual long-term care
insurance policies shall contain a renewability provision. The provision shall
be appropriately captioned, shall appear on the first page of the policy, and
shall clearly state that the coverage is guaranteed renewable or
noncancellable. This provision shall not apply to policies which do not contain
a renewability provision and under which the right to nonrenew is reserved
solely to the policyholder as long as required premiums are paid on time. A
long-term care insurance policy or certificate, other than one where the
insurer does not have the right to change the premium, shall include a
statement that premium rates may change.
b) Riders and Endorsements. Except for riders
or endorsements by which the insurer effectuates a request made in writing by
the insured under an individual long-term care insurance policy, all riders or
endorsements added to an individual long-term care insurance policy after date
of issue or at reinstatement or renewal which reduce or eliminate benefits or
coverage in the policy shall require signed acceptance by the individual
insured. After the date of policy issue, any rider or endorsement which
increases benefits or coverage with a concomitant increase in premium during
the policy term must be agreed to in writing signed by the insured, except if
the increased benefits or coverage are required by law. Where a separate
additional premium is charged for benefits provided in connection with riders
or endorsements, such premium charge shall be set forth in the policy, rider or
endorsement.
c) Payment of
Benefits. A long-term care insurance policy or certificate that provides for
the payment of benefits based on standards described as "usual and customary,"
"reasonable and customary" or words of similar import shall include a
definition of such terms and an explanation of such terms in its accompanying
outline of coverage.
d)
Limitations: If a long-term care insurance policy or certificate contains any
limitations with respect to preexisting conditions, such limitations shall
appear as a separate paragraph of the policy or certificate and shall be
labeled "Preexisting Condition Limitations". Limitations to preexisting
conditions shall be in accordance with Section 351A-5 of the Code.
e) Other Limitations or Conditions on
Eligibility for Benefits. In addition to complying with Section 351A-6 of the
Code, beginning August 30, 1990, a long-term care insurance policy or
certificate containing any limitations or conditions for eligibility other than
those prohibited in Section 351A-6 shall set forth a description of such
limitations or conditions, including any required number of days of confinement
in a separate paragraph of the policy or certificate and shall label such
paragraph "Limitations or Conditions on Eligibility for Benefits".
f) Disclosure Requirements for Accelerated
Life Products
1) Policy Summary
At the time of policy delivery, a policy summary shall be
delivered for an individual life insurance policy that provides long-term care
benefits within the policy or by rider. This requirement does not apply to
qualified long-term care insurance contracts. In the case of direct response
solicitations, the insurer shall deliver the policy summary upon the
applicant's request, but regardless of request shall make delivery no later
than at the time of policy delivery. In addition to complying with all
applicable requirements, the summary shall also include:
A) an explanation of how the long-term care
benefit interacts with other components of the policy, including deductions
from death benefits;
B) an
illustration of the amount of benefits, the length of benefit, and the
guaranteed lifetime benefits if any, for each covered person;
C) any exclusion, reductions and limitations
on benefits of long-term care; and
D) if applicable to the policy type, the
summary shall also include:
i) disclosure of
the effects of exercising other rights under the policy;
ii) disclosure of guarantees related to
long-term care costs of insurance charges; and
iii) current and projected maximum lifetime
benefits.
2)
Benefit Reports
Any time a long-term care benefit, funded through a life
insurance vehicle by the acceleration of the death benefit, is in benefit
payment status, a monthly report shall be provided to the policyholder. The
report shall include:
A) any long-term
care benefits paid during the month;
B) an explanation of any changes in the
policy, including changes in death benefits or cash values, due to long-term
care benefits being paid out; and
C) the amount of long-term care benefits
existing or remaining.
3)
Outline of Coverage
The Outline of Coverage should include an example filled out in
John Doe form that illustrates how the long-term care benefit is calculated.
Refer to Section
2012.110 and Exhibit C
for format and content requirements.
g) Disclosure of Tax Consequences. With
regard to life insurance policies that provide an accelerated benefit for
long-term care, a disclosure statement is required at the time of application
for the policy or rider and at the time the accelerated benefit payment request
is submitted, that receipt of these accelerated benefits may be taxable, and
that assistance should be sought from a personal tax advisor. This disclosure
statement shall be prominently displayed on the first page of the policy or
rider and any other related documents. This subsection (g) shall not apply to
qualified long-term care insurance contracts.
h) Benefit Triggers. Activities of daily
living and cognitive impairment shall be used to measure an insured's need for
long-term care and shall be described in the policy or certificate in a
separate paragraph and shall be labeled "Eligibility for the Payment of
Benefits". Any additional benefit triggers shall also be explained in this
paragraph. If these triggers differ for different benefits, explanation of the
trigger shall accompany each benefit description. If an attending physician or
other specified person must certify a certain level of functional dependency in
order to be eligible for benefits, this too shall be specified.
i) A qualified long-term care insurance
contract shall include a disclosure statement in the policy and in the outline
of coverage as contained in Exhibit C(3) that indicates that the policy is
intended to be a qualified long-term care insurance contract under Section
7702B(b) of the Internal Revenue Code of 1986, as amended (
26 USC
7702B(b) ).
j) A nonqualified traditional long-term care
insurance contract shall include a disclosure statement in the policy and in
the outline of coverage as contained in Exhibit C(3). The disclosure statement
shall indicate that the policy is not intended to be a qualified long-term care
insurance contract under Section 7702B(b) of the Internal Revenue Code of 1986,
as amended (
26 USC
7702B ).