AD Banker Comprehensive Practice Exam

Benefits received from an individual Long-Term Care Policy are not subject to what?

1. Income tax

2. Sales tax

3. Deductibles

4. Premiums

The correct answer is: Income tax

Benefits received from an individual Long-Term Care Policy are not subject to income tax. This is an important aspect of long-term care insurance, as it provides policyholders with financial relief when they need assistance with daily activities due to chronic illness, disability, or cognitive impairment. Since these benefits are classified as reimbursements for care and are intended to help cover medical expenses, they are typically exempt from income tax obligations. This tax advantage encourages individuals to invest in long-term care insurance, as it can help mitigate the financial burden of long-term care needs without further taxation on the benefits received. Understanding this aspect can guide individuals in making informed decisions about planning for their future care. The other options listed do not affect the tax status of the benefits. Sales tax typically pertains to the purchase of goods and services rather than insurance benefits. Deductibles are aspects of policy structure related to payments made by the insured before benefits kick in and do not apply to the taxability of benefits received. Premiums are the costs paid for the policy and do not influence the tax implications of benefits received from the policy itself.