Consumers looking for long-term care insurance (LTCi) may ask about the differences between indemnity vs reimbursement plans. This is a valid question, as there are key factors making them separately unique. Deciding to purchase an indemnity or reimbursement plan might significantly change your financial care, depending on your situation and needs.
We’ll discuss indemnity vs reimbursement plans to help you better understand them for your LTCi.
Indemnity vs Reimbursement Plans
The primary difference between these two plans involves how the client will receive their maximum monthly benefit. The plan’s price is also something else to keep in mind when looking at the comparison. These two primary aspects determine which plan is best for you. However, there are drawbacks to each plan – which can also impact how clients can make their decision.
Indemnity Plans
Clients who qualify for a claim will receive a check per month for the maximum monthly benefit. For instance, a maximum monthly benefit of $5,000 per month with the benefit period being 36 months, the client would receive checks for each month for the 36 months in the amount of $5,000.
An indemnity plan requires no bills, receipts, or caregiver approval(s). This means family members can acquire compensation for informal care, along with having lots of flexibility to consider. Unfortunately, one downside is that these types of plans cost more than reimbursement plans. Interested consumers of this plan will need to do a cost-benefit analysis to determine if it’s right for them, even with a high price tag.
Reimbursement Plans
Clients using a reimbursement plan will be reimbursed for qualified expenses, but only up to the monthly maximum benefit. Due to this, they must show receipts to the insurance company. If we use the same indemnity plan example above, clients with $5,000 per month can show a receipt for $3,000 and receive that amount if qualified – leaving $2,000 in their pool of money.
This is less expensive than an indemnity plan, but requires the client to provide receipts and ensure they are qualified for an reimbursement. The upside is that leftover money can still be used for the future. However, in some cases that untouched pool of money can simply sit there without being used.
Plan Comparison
Indemnity
- Qualified claims will receive the monthly maximum benefit for the benefit period.
- More flexibility for family members and the future, but the pool of money is exhausted sooner than later.
Reimbursement
- Qualified expenses will be paid, with leftovers being saved in the pool of money.
- Clients must provide receipts to the insurance company.
What’s Best For You? | Long-Term Care
Finding the best plan for you can be challenging, as every person’s situation is unique. For some, indemnity plans are the best option – while others may want the reimbursement plan. Weigh the costs and benefits of each, then make your decision! They both will provide financial support for qualified expenses, but behave differently when compared to each other.
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