Long-term care (LTC) cash indemnity vs reimbursement
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Long-term care is designed to help people live as independently and safely as possible when they can no longer do so on their own.
While there is a common misconception that LTC is a covered benefit that you already have, many people will need some form of long-term care coverage to provide an additional stream of funds to help pay for services such as at-home care, nursing home services or adult day care.
When considering LTC coverage, there are 2 ways that policies pay benefits: cash indemnity and reimbursement. Each type offers different advantages, so you’ll want to choose the option that best meets your unique planning needs.
What is cash indemnity?
Cash indemnity policies, such as the ones offered by Nationwide®, provide a monthly check for the amount you elect up to the maximum amount of long-term care benefit. No bills, receipts or any other type of monthly paperwork is required once a claim is approved.
If you plan to remain in your own home and receive care from a family member, this type of policy would give you the flexibility to use your monthly benefit for home accessibility updates and to pay your loved one for informal caregiving.
What is reimbursement in insurance?
Reimbursement policies require the submission of bills and receipts each month for the LTC costs you incur. These policies specify which types of LTC expenses are covered, and you (or the facility) will be reimbursed for the exact amount of qualifying expenses up to the maximum benefit amount. This offers the potential for your benefit to last longer, because you may not receive the full amount each month.
Licensed caregivers are required with these types of policies, so you can’t use them for informal care from family members or friends. But the insurance company will, in some cases, work directly with the caregiving facility, making these policies a good option if you want someone to manage that part of the process for you.
Cash indemnity vs reimbursement: What’s the difference?
| Cash Indemnity | Reimbursement | |
|---|---|---|
| What’s the claim process? | No bills or receipts are required to be submitted. | Bills need to be submitted each month. |
| What are the policy limitations? | You can elect to receive up to 100% of the available monthly benefit amount and use it without policy restrictions. | You’ll need to wait to see which services are covered and the insurance company will send a check for only what’s covered (with a maximum of the LTC benefit amount). |
| What if you need more/less than the monthly benefit? | If your actual current expenses are less than the available benefit amount, you can choose to take a lower amount to preserve the death benefit or extend the period over which LTC benefits will be available; or you can bank any amount not currently needed and use it to pay future expenses. | You’ll need to pay out of pocket for uncovered services and you won’t have any leftover benefits to pay for “uncovered” costs. |
| What are the tax implications? | Under certain circumstances, LTC benefits received may be taxable. Please consult with your tax advisor. | Benefits are received tax-free. |
Which LTC policy is right for you?
Whether you prefer to have your full LTC benefit sent to you to use as you see fit or simply reimburse the LTC provider directly, there is an LTC policy available to meet your needs. And if you need more help deciding, our complimentary Nationwide team of specialists is available to help.
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