What is the taxation on an individually owned long term care insurance?

There is no "taxation" on individually owned products. HIPAA 1996 says that LTC benefits are deemed income tax free as long as they don't exceed the established "per diem" maximum. For 2010 that number is $290 per day. If you receive benefits in excess of $290 per day, you will need to explain why. If you can't prove that you have expenses in that amount, you will be taxed on the excess. All LTC benefits are reported on Form 1099-LTC. If you get one of these forms you also need to complete IRS Form 8853.