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For Individuals & Families

Reimbursement vs. cash indemnity for long-term care insurance — what’s the difference?

By: Dennis Ho

This refers to how you receive your benefits each month from a long-term care insurance policy. Once you qualify for benefits under long-term care insurance, most policies today pay you monthly under one of two systems — reimbursement and cash indemnity.

Reimbursement works as it sounds. Each month you pay for care with your own funds and track the spending and receipts. At the end of the month, you submit a request to your insurer for reimbursement of your expenses and they reimburse you for your costs up to the monthly maximum available under your policy. As long as you continue to qualify for benefits under your policy, you can continue submitting for reimbursement each month.

With cash indemnity, the process is simpler. As soon as you qualify for long-term care benefits, your insurer simply pays you the monthly maximum benefit available under your policy. No receipts to submit or papers to file. As long as you continue to qualify for benefits under your policy, your insurer keeps paying you each month automatically.

If cash indemnity sounds much easier - it is. It’s nice to know that if you qualify for benefits, you’ll be able to automatically get paid without the hassles of tracking spending or submitting paperwork. But, while cash indemnity benefits are great, reimbursement policies are not as painful as they sound. Most insurers have streamlined their processes so submission for reimbursement is fairly simple. And In most cases, you can have your care providers or family members submit receipts to your insurer on your behalf which simplifies things further. Because of this, don’t let the reimbursement vs. cash indemnity difference sway you too much. All things being equal, if one policy has cash indemnity and another has reimbursement, then definitely go with the cash indemnity policy. But if one policy provides you with more benefits for your money, don’t let a reimbursement model scare you away from it.

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