Quick LTC Fact: Reimbursement vs. Indemnity

June 26, 2015

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c5a83c_824f1b17997a43859cd122b09aeed852Reimbursement means the policyholder is paid after services are received. The amount paid back to the policyholder is based on the either a daily or monthly amount (up to a pre-selected limit) for qualified services provided. The policyholder must maintain and submit receipts to their insurance company to receive payment. Daily reimbursement plans are common among Traditional long-term care plans and may require more planning to manage care costs. For example, if a client has a policy that reimburses up to $200 per day, any amount spent for care over $200 in a single day will be the responsibility of the client. If they spend less than the $200 daily limit, the difference will remain in their pool of benefits for future use and will extend their policy. There is no averaging on daily limit plans so you cannot spend more than your daily limit one day because you spent less on another day. Services are looked at separately for each day and the total for the month is reimbursed the following month. Monthly reimbursement policies are common on Hybrid and Asset Based plans and give more flexibility. For example, if the client has a $6000 monthly limit, they may spend up to that amount in any number of days and be reimbursed up to the full monthly amount of their plan. This eliminates having to juggle services to avoid going over a daily limit and provides more options for scheduling care especially when receiving care at home.

Indemnity (Cash Benefit):

c5a83c_824f1b17997a43859cd122b09aeed852Indemnity plans pay a monthly cash benefit once a long-term care claim is triggered regardless of the level of care provided. Once you are on claim, your plan will pay you the amount of your contract every month until the plan has been exhausted. There are no limitations from the insurance company as to how these funds can be spent which gives the policyholder the most flexibility in selecting care options. Indemnity plans do not require recordkeeping or receipts be sent to the company to receive the monthly benefit. However, indemnity plans have all but disappeared from traditional long-term care plans. Asset Based plans are still offered with an indemnity option and it’s a popular choice among clients who want the most flexibility with their care options.

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