If Box 3 is marked "Per Diem" (which will happen for policies that are considered Indemnity policies) then the amount you may exclude from taxable income being reported is limited.
Because benefits were paid on a per diem (indemnity) basis, without regard to the actual long-term care expenses incurred, the amount of benefits that may be excluded from income is subject to a daily maximum amount.
If this per diem (indemnity) limitation is exceeded, part of the benefits received may be taxable. The amount of the limitation increases every year.
I have never seen any insurance company pay out more the the daily max so none has ever been taxable in my 30+ years in the business and my partner's 45+ years. https://www.comfortltc.com/news/category/ltc-tax-planning#:~:text=(This%20is%20a%20%2430%2Fday,which....
