Indemnity vs. reimbursement benefit structures within long-term care insurance policies can be tricky to understand. Here’s an explanation of each:
Indemnity Long-Term Care Insurance:
With an indemnity-based policy, the insurance company pays a fixed daily or monthly benefit amount regardless of the actual expenses incurred for long-term care services. The policyholder receives the predetermined benefit amount regardless of whether the actual costs are higher or lower. This means that even if the care costs less than the benefit amount, the policyholder still receives the full benefit.
For example, if the policy provides a $200 daily benefit and the actual cost of care is $150 per day, the policyholder will receive the full $200 benefit. However, if the care costs exceed the benefit amount, the policyholder is responsible for covering the additional expenses.
Indemnity policies provide flexibility, as policyholders have the freedom to use the benefit as they see fit, without the need to submit receipts or provide detailed expense documentation to the insurance company.
Reimbursement Long-Term Care Insurance:
Reimbursement-based policies, on the other hand, reimburse the policyholder for the actual expenses incurred for qualifying long-term care services, up to the policy’s benefit limit. The policyholder must submit receipts and provide documentation to the insurance company to receive reimbursement for eligible care expenses.
For instance, if the policy has a daily benefit limit of $200 and the actual cost of care is $150 per day, the policyholder can submit the documentation and receive reimbursement for the $150 spent. Reimbursement policies typically require the submission of care service receipts to verify the expenses incurred.
Reimbursement policies provide the advantage of transparency, as policyholders are reimbursed for the actual expenses they have paid. However, it’s important to note that reimbursement policies may have specific coverage limits, waiting periods, and eligibility criteria for different types of care services.
When considering indemnity vs. reimbursement long-term care insurance, it’s crucial to carefully review the terms and conditions of the policy, including coverage limits, premium costs, and other relevant factors. Consider your personal preferences, budget, and specific care needs to choose the option that best aligns with your requirements. Consulting with a knowledgeable insurance professional can also provide valuable guidance in selecting the right type of long-term care insurance for your situation.
Roy Snarr has built a multi-million dollar business marketing and selling asset protection strategies for “safe” retirement. CFF®, CLTC®, NSSA ®, LACP
