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Reimbursement vs Indemnity: Choosing the Right Long-Term Care Plan for your Needs

Tim Owens

Updated: May 8, 2023

This blog goes into detail of the two different ways you can receive Long-Term Care benefits. Some insurance carriers offer Reimbursements, whereas other carriers offer Indemnity. If you would prefer to pay a relative or loved one for Long-Term Care support, then this blog will alert you to the importance of knowing what type of policy you'd need.


The importance of having a solution for addressing extended medical needs is often overlooked by many Americans. In fact, someone turning 65 today has approximately a 70% chance of needing some type of long-term care service. And as many as 20% will need care beyond 5 years. Long-Term Care is therefore important to plan for as we near our retirement.


Insuring yourself against Long-Term Care expenses can be addressed in a variety of ways. Permanent life insurance products now offer optional Long-Term Care riders. There are fixed and indexed annuities that are tailored to give the insured as great of a pool for Long-Term Care as possible while also achieving growth within the annuity. Whole life policies that are specifically designed to provide Long-Term Care protection also exist for the more conservative individual. In short, there are solutions out there for every risk profile, and we are lucky to have a team of Long-Term Care experts behind us that have been serving the industry for decades.


Now when it comes to Long-Term Care insurance, there are two different ways in which insurance companies pay for Long-Term Care costs. These two different options are what’s called one, Reimbursement, and second, Indemnity (also known as Cash Benefit).


The Difference Between Reimbursement and Indemnity


The difference between reimbursement and indemnity is quite simple. In the case of reimbursements, the insured will need to provide the insurance company with the bills that were incurred for long-term care services.


For example, John has $7,500 of monthly reimbursement benefit from his Long-Term Care annuity. John decides that a nursing home is the best option for his needs, and the nursing home charges him $7,000 for his stay each month. With a reimbursement policy, John would take the bill incurred from the nursing home and provide it to the insurance carrier. The insurance carrier would then reimburse John for the $7,000 bill that was incurred. The remaining $500 would remain in his Long-Term Care pool.


In the case of indemnity (also called cash benefit), the insured needs acknowledgment from a Licensed Health Care Practitioner that the insured needs Long-Term Care. When the insured provides the insurance carrier with the statement from a Licensed Health Care Practitioner, then the insurance carrier will write a check of the full monthly benefit and you can use it at your own discretion.

For example, John has $7,500 of monthly indemnity benefit with his whole life Long-Term Care policy. As he could no longer perform two out of six activities of daily living, he is entitled to the full amount by the insurance carrier. John receives the full $7,500 from the insurance carrier and decides to use $5,000 of the money received to pay his grandson to look after him. The remaining $2,500 he can pocket or spend at his own discretion.


As you see in the examples above, indemnity benefits can allow for more flexibility in how the benefit is used. It is important that you disclose to your financial professional how you would like your Long-Term Care package to be tailored. This enables us to find solutions that can take care of all your wants and needs should the need for care arise. Would you like to discuss the best solution for you?


Contact us today to see what Long-Term Care solution is best for you!


(559) 322-2230



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Securities offered through World Equity Group, Inc., member of FINRA and SIPC, a Registered Investment Adviser SKA Financial Group is not owned or controlled by World Equity Group, Inc. World Equity Group, Inc. does not provide tax or legal advice.

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