In 2010, the Pension Protection Act (PPA) became effective allowing long-term care benefits to be received tax-free from a non-qualified annuity. This legislation has allowed the use of long term care annuities to become very efficient when planning for long term care needs.

Before the Pension Protection Act's (PPA) LTC benefits took effect in 2010 you had to pay taxes on the annuity growth inside your annuity before paying for your long term care expenses. Now, you are able to use your tax-deferred growth of your annuity dollars to pay for your long term care care expenses tax-free with a PPA compliant long term care annuity.

For example, before the Pension Protection Act if you owned an annuity with a $100,000 cost basis that had grown into $200,000 you would have to pay tax on the gain of $100,000 before you used your funds for long term care expenses. After paying taxes on your gain, you might only have a net $165,000 to use for long term care expenses.

Today, your gains inside a PPA compliant annuity are tax-free.

Additionally, you can also complete a tax-free 1035 exchange of current annuity or life insurance cash value into a long term care annuity and turn the gain of cash value within in your in-force policy into tax free LTC benefits, if care is needed.

So, the tax advantages of using LTC annuities today for planning are exceptional.

How Do Long Term Care Annuities Work?

Long term care annuities are hybrid long term care policies that provide you with long term care benefits if needed, or a return of your premium through its underlying cash value if care is not needed. Hybrid long term care policies may be based upon an annuity or a life insurance policy, each having their advantages and disadvantages depending upon your specific needs and situation.

Long term care annuities will provide you with a multiplier of your premium deposit typically 3x (or 2x) your deposit to provide you with an extension of long term care benefits in addition to your premium deposit should you need care. To qualify for benefits your doctor would have to certify you as being Chronically ill.  To be certified, you will have to either 1) need assistance with at least 2 activities of daily living (eating, bathing, dressing, toileting, transferring, maintaining continence) or 2) have a severe cognitive impairment such as Alzheimer's or dementia.

So, for example if you deposit $200,000 of premium and you receive the optimal 3x multiplier, you now have $600,000 tax-free for long term care needs. If care is not needed, you still own the $200,000 of cash value (+ growth) that you can pass down as a legacy to your beneficiaries.

With long term care annuities, the underwriting approval process is generally streamlined and very easy, with only a handful of health questions to answer to be approved.

What Sets Nationwide CareMatters Annuity Apart From The Competition?

There are only a handful of long term care annuity underwriters in the hybrid long term care insurance arena, with OneAmerica and Global Atlantic historically underwriting the majority of the business. Nationwide has underwritten hybrid LTC/life insurance policies for 15 years.

Nationwide introduced the CareMatters Annuity in late 2025 as a simplified alternative to the offerings available through OneAmerica and Global Atlantic.

The value proposition of the Nationwide CareMatters portfolio is all of its policies are 100% cash indemnity models. Unlike the reimbursement models offered through OneAmerica and Global Atlantic, cash indemnity policies do not require you to submit any receipts for care to receive benefit reimbursement. Nationwide places no restrictions on how you may elect to use your benefits. All informal care is covered, including care in your own home by family or friends. Additionally, 100% of your benefits are available to be used internationally.

Also, the Nationwide CareMatters Annuity guarantees an annual 3% crediting interest rate to be applied to the annuity cash value.

This benefit flexibility and interest rate guarantee that the CareMatters Annuity provides immediately established the CareMatters product as possibly the best long term care annuity in the marketplace under the right circumstances.

What are the Product Highlights of the CareMatters Annuity?

Let's take a quick look at the highlights of the CareMatters annuity and then we will discuss when you might want to consider it.

Benefit type: cash indemnity, single life coverage or joint life coverage (spouse only)

Issue ages: 40-80

LTC Benefit Contract Multiple: Preferred Class 3x ages 40-74; Standard Class ages 40-74; Select Class 2x ages 75-80

LTC Individual Benefit Periods: Preferred and Select 72 months; Standard 48 months

LTC Joint Benefit Periods: Preferred 108 months; Select 84 months Standard 72 months

(important note: in my opinion, you will definitely want to be within ages 40-74 and Preferred risk to receive the 3x multiple or you might want to look at different underwriters such as Global Atlantic or OneAmerica)

Payment options: single premium lump sum, and/or a 1035 exchange of annuity or life insurance cash value.

Guaranteed crediting interest rate:  3% guaranteed

Optional inflation protection: 5% compound

Optional nonforfeiture benefit: Provides a paid-up LTC benefit upon annuitization or full surrender

Free withdrawals: 10% 

Elimination Period: 90 calendar days. Upon completion, monthly LTC benefits for the first 90 days will be paid retroactively

International benefits: 100%

What Health Conditions Would Result In a Declined CareMatters Annuity Application?

Underwriting is fairly easy to be approved for the policy, however you should be aware of the conditions that will absolutely result in a decline.

Of course, currently receiving care will not be acceptable; as will the current use of medical equipment such as a wheelchair, walker, motorized scooter or oxygen, for example.

Other medical conditions that will always be declined by long term care underwriters are: Parkinson's, ALS, Multiple Sclerosis, Huntington's, mild cognitive impairment, dementia, Alzheimer's, COPD with tobacco use, back surgery with ongoing pain, weakness, or narcotics, and cirrhosis of the liver.

What Do The Nationwide CareMatters Annuity LTC Benefits Look Like?

Let's take a look at a hypothetical example of the benefits provided for a 65 year old male.  We can use a $200,000 deposit.

A $200,000 deposit will provide you with $600,000 on Day 1. $8332 month for 6 years.

The growth of your LTC benefits will be the following:

For LTC annuities, these benefits are excellent. You can deposit $200,000 at age 65, and if care isn't needed with 3% guaranteed annual growth. your annuity has grown guaranteed to $353,000 in 20 years; if care is needed, you can receive up to $1,000,000 tax free. And your benefits are paid in cash, no receipts needed. Nationwide CareMatters Annuity will be an excellent option for all applicants ages 40-74 that receive the 3X multiplier.

Here is the complete illustration.

CareMatters Annuity illustration

Now, for comparison purposes let's look at a different hybrid LTC policy option: a life insurance based hybrid. And then we can review the pros and cons of each hybrid policy option, annuity and life insurance hybrid.

Let's look at the Securian SecureCare IV hybrid policy, also a 100% cash indemnity model like the Nationwide CareMatters Annuity. And also 100% international coverage, as well. Same $200,000 single premium deposit. Same 6 year LTC benefit period.

With the life insurance hybrid, on Day 1 you will have $11,104 monthly and $861,938 available.

Here is the Securian illustration of benefits.

SecureCare IV illustration

So, you can quickly eyeball the LTC benefits and conclude immediately the life insurance hybrid will provide you with the much higher LTC benefits assuming the same premium deposit.

You may ask, Why?

Well, the answer is easy and straightforward.

The underwriting on the annuity policy is VERY EASY. Almost all contracts will be approved and issued.

The underwriting to be approved with the life insurance hybrids is much more stringent. Medical records may be ordered.  More applicants will be postponed or declined.

So, if you are healthy enough to be approved for LTC coverage, you will always want to consider the life insurance hybrid first, if you want to maximize your LTC benefits. You will almost always receive 30%-40% more LTC benefits for the same premium deposit with the life insurance hybrid LTC policies.

The life insurance hybrid also has the flexibility of funding over flexible terms such as 5 years or 10 years. A single pay is not required.

You may want to consider using the LTC annuity if the following apply:

1) Possibly your health history might not allow you to be approved for the life insurance hybrid.

2) Possibly you want to use annuity cash value to exchange on a tax-free basis under IRC Section 1035. This will not be possible to transfer annuity cash value into a life insurance hybrid.

3) You care more about maximizing the annuity contract value/death benefit than maximizing your LTC benefits.

4) Maybe you are an older age, in your 70's, for example, and the numbers on the annuity will start to become more favorable.

If any of these apply, the LTC annuity can be an appropriate consideration.

And if you are able to command the 3x multiplier (ages 40-74) then the Nationwide cash indemnity CareMatters Annuity option will be terrific.

Contact Jack Lenenberg for Complimentary LTC Insurance Advice

If you have questions, or seek advice on your long term care insurance options, please feel free to give me a call at (800) 891-5824. Or if easier, you may schedule a call with me through the link below to my online calendar. I will be pleased to help guide you through your various options.