Indemnity vs Expense-Incurred Long-Term Care: What You Need to Know [2024]

Navigating the complex terrain of long-term care insurance, the comparison between “Indemnity vs Expense-Incurred Long-Term Care” policies brings to light the pivotal role that the choice of insurance provider plays in shaping coverage rates, options, and potential discounts. In our exploration, we meticulously scrutinize leading companies, examining their offerings through the lenses of customer reviews and comprehensive policies. Uncover how these insurers tailor rates to varying customer profiles, shedding light on the nuanced interplay between coverage benefits and premium costs.

Indemnity Long-Term Care Insurance:

Pros:

• Flexibility in Benefit Usage: Policyholders have the freedom to use the predetermined fixed daily benefit as they see fit, allowing for various care options, including in-home care, assisted living, or nursing home care.
• Coverage for Informal Care: Provides the option to pay for informal care provided by family members or friends, offering flexibility in choosing caregivers.
• Non-Medical Expense Coverage: Offers the ability to cover non-medical expenses related to long-term care, enhancing the scope of coverage.

Cons:

• Higher Upfront Costs: Generally, indemnity plans have higher monthly premiums, making them more expensive to maintain.
• Limited Cost Control: While the benefit amount is fixed, policyholders may incur additional costs beyond the daily limit, leading to potential out-of-pocket expenses.

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Reimbursement Long-Term Care Insurance:

Pros:

• Lower Monthly Premiums: Typically comes with more affordable monthly premiums, making it a cost-effective option for policyholders.
• Controlled Cost Structure: Ensures that benefits cover only up to the actual cost of care, providing a clear and controlled reimbursement process.
• Possibility of Extended Coverage: Depending on the policy terms, there may be an option to extend the benefit period with any unused LTC benefits.

Cons:

• Limited Benefit Flexibility: Policyholders receive benefits only up to the cost of care, limiting the flexibility compared to indemnity plans.
• May Not Cover Informal Care: Some reimbursement plans may not provide coverage for informal care by family members or friends.

Reimbursement Long-Term Care Insurance: The Clear Winner

Reimbursement plans offer a more accessible and cost-effective solution for a broader range of individuals due to their lower upfront costs. The transparent reimbursement process ensures policyholders receive the benefits they are entitled to without unnecessary financial strain. While indemnity plans provide unmatched flexibility, the associated higher costs may act as a deterrent for many potential policyholders.

Upfront Costs: Reimbursement plans offer lower upfront costs, making them more accessible and cost-effective.

Transparency: The transparent reimbursement process ensures policyholders receive entitled benefits without unnecessary financial strain.

Flexibility vs. Cost: While indemnity plans provide unmatched flexibility, the higher associated costs may act as a deterrent for many.

Financial Savings: Opting for a reimbursement plan results in financial savings for policyholders.

Extended Coverage: Reimbursement plans offer the potential for extended coverage beyond the benefit period.

Top Choice: For the best long-term care insurance combining affordability, transparency, and extended coverage, Reimbursement Long-Term Care Insurance is the top choice.

Avoiding Overpayment: Reimbursement plans ensure policyholders are reimbursed up to the actual cost of long-term care, avoiding unnecessary overpayment.

Balanced Solution: Reimbursement of Long-Term Care Insurance strikes a balance between flexibility and affordability.

Consideration of Diverse Needs: Overall recommendation leans toward Reimbursement of Long-Term Care Insurance, considering the diverse needs and priorities of policyholders.

Comprehensive Coverage: Choosing Reimbursement Long-Term Care Insurance aligns with financial prudence and comprehensive coverage for future healthcare needs.

In the pursuit of a balanced and efficient long-term care insurance solution, opting for a reimbursement plan is a prudent decision. This choice not only results in financial savings but also provides a clear and straightforward mechanism for reimbursement. Policyholders can rest assured that they are getting the most out of their coverage without compromising their financial well-being.

What is Long-Term Care Insurance?

Long-term care (LTC) insurance covers expenses incurred in nursing homes, assisted living homes, or adult daycare. Your policy may also cover hospice, home, and respite care, as well as live-in or visiting caregivers, housekeepers, therapists, or private nurses (read our “Will health insurance pay for hospice?” for more information).

LTC policies also come with certain limitations that will impact when you qualify for benefits and how much you will receive. Typically, you cannot take advantage of LTC benefits until after the waiting period. This waiting period can last up to 90 days. Insurance companies will not pay for any long-term care until after those three months.

They will also wait to release LTC benefits until you are eligible. To qualify for long-term care benefits, a healthcare provider must certify that you are unable to do the following daily activities without assistance:

• Eating
• Dressing
• Bathing
• Using the bathroom
• Walking or standing

Read more:

• How do you file a complaint against a long term care insurance company?
• How much does long term care insurance cost?

Standard health insurance and life insurance policies do not provide LTC. Medicare will also not cover long-term care facilities. Without a policy, you will be responsible for these costs out-of-pocket. 

On average, long-term care can cost:

• $1,500 per month for adult daycare
• $3,750 per month for assisted living
• $7,000-$8,000 per month for nursing home care

If you have an LTC policy, it will pay a daily benefit toward your long-term care. These benefits can range anywhere between $5 and $500 per day, and you can receive them for up to six years after your benefits start. However, your benefit period and amounts are determined by the type of LTC policy you choose.

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What is the Difference Between Indemnity and Reimbursement Long-Term Care Insurance?

Indemnity and reimbursement LTC insurance provides the same type of coverage but in different amounts. For example, if you choose an indemnity plan, you will receive your entire benefit amount regardless of the cost of care.

So, if your benefit amount is $500 per day, but your in-home nurse only costs $300, you will still receive the full amount per day. However, you are responsible for any additional costs that exceed your policy’s daily limit.

An indemnity policy allows you to spend your benefits on care as you see fit, but this policy will cost more at offset. You will likely find cheaper long-term care insurance rates with a reimbursement plan.

A reimbursement policy, also known as expense-incurred insurance, will only pay up to the cost of your long-term care. This means if your in-home nurse is $300 per day but your daily benefit is $500, then you would only receive the $300 to cover the cost of your care. 

While you’re still responsible for any additional costs with a reimbursement plan, you might have the option of extending your coverage past the benefit period if you have money left over. Shop around with multiple health insurance companies and compare policies to find the best coverage options for your needs.

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How Much Does Indemnity vs. Reimbursement Long-Term Care Insurance Cost?

Determining your long-term care insurance rates will depend on many different factors. Your age and health record will have the biggest impact on your rates — the older you are, the more you will pay for coverage, no matter what kind of policy you choose. On average, long-term care insurance will cost between $1,800 and $4,000 per year ($150-$350/mo).

However, you can lower your LTC rates by choosing a smaller benefit amount and shorter benefit period. Play around with your policy options with different insurance companies to see which will offer you the best type of long-term care coverage at the best price. 

What are the Best Long-Term Care Insurance Companies?

Shopping for LTC coverage is easy when you compare multiple insurers online. This will allow you to see how each company varies when it comes to rates, policy options, benefit amounts, and waiting periods. 

Get started now by taking a look at the table below. We found the top five LTC insurers and listed each company’s maximum lifetime benefit period and amount.

Each insurance company provides LTC benefits differently, depending on what kind of policy you choose. For example, Northwestern Mutual offers up to $12,000 in benefits per month, but you can only request those benefits in $100 increments. 

Further, some companies will provide benefits for up to five years or more, while others stop benefits after a maximum of two or three years. If you need extended long-term care, shop around with different companies to find a policy that will cover you during that time.

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Case Studies: Indemnity vs Expense-Incurred Long-Term Care

Case Study 1: John’s Experience With Indemnity Long-Term Care Policy

John, a 65-year-old retiree, opted for an indemnity long-term care policy to secure his future healthcare needs. Over time, John’s health deteriorated, and he required assistance with daily activities. With his indemnity policy, John received a fixed daily benefit, which he could use however he wished.

He used a portion of the benefit to hire a caregiver to assist him at home, and the remaining amount helped cover other long-term care expenses.

Case Study 2: Sarah’s Experience With Expense-Incurred Long-Term Care Policy

Sarah, a 72-year-old widow, chose an expense-incurred long-term care policy to protect herself from potential healthcare costs. As Sarah’s health declined, she moved into an assisted living facility, where she received care services. With her expense-incurred policy, Sarah submitted reimbursement claims for the eligible expenses incurred at the facility.

The policy covered a percentage of the expenses, and Sarah had to pay the remaining portion out of pocket.

Case Study 3: Mark and Lisa’s Comparison of Indemnity and Expense-Incurred Policies

Mark and Lisa, a married couple in their early 60s, wanted to explore different long-term care options. They researched both indemnity and expense-incurred policies to understand the benefits and drawbacks of each. After careful consideration, Mark and Lisa decided to purchase an indemnity policy for Mark and an expense-incurred policy for Lisa.

This way, they could have flexibility with Mark’s benefits while ensuring Lisa’s coverage aligned with their anticipated healthcare needs.

Case Study 4: Susan’s Dilemma in Choosing the Right Policy

Susan, a 55-year-old professional, faced a dilemma when it came to selecting a long-term care policy. She was unsure whether to opt for an indemnity or expense-incurred policy. Susan’s independent nature led her to choose an indemnity policy, as it provided the flexibility to make her own care arrangements.

Although the fixed daily benefit was lower compared to expense-incurred policies, Susan valued the freedom to use the funds as she deemed fit.

Case Study 5: David’s Cost Analysis of Indemnity and Expense-Incurred Policies

David, a financial planner, conducted a cost analysis for his clients considering long-term care policies. He compared the premiums, benefits, and potential out-of-pocket expenses for both indemnity and expense-incurred options. David found that while indemnity policies offered greater flexibility, they generally had higher premiums.

On the other hand, expense-incurred policies had lower premiums but required careful monitoring of expenses to ensure adequate coverage.

Indemnity vs. Reimbursement Long-Term Care: The Bottom Line

The most significant difference between indemnity and reimbursement long-term care coverage is the number of benefits you receive. With an indemnity plan, you will receive the full benefit amount listed in your policy regardless of the cost of care. A reimbursement long-term care plan will only provide up to the cost of care. 

Indemnity plans guarantee that you receive the total LTC benefits listed in your policy, but you will pay more per month for coverage. On the other hand, choosing a reimbursement plan comes with cheaper monthly insurance rates. Depending on your policy terms, you may also be able to extend your benefit period with the extra LTC benefits you did not receive.

On average, LTC insurance policies cost between $150 and $350 per month. Compared to the cost of nursing home care, which averages between $7,000 and $8,000 per month, buying an indemnity or reimbursement long-term care plan will save you money.

It may be worth it to purchase long-term care sooner rather than later. Like life insurance, the longer you wait, the more LTC insurance will cost. Buying now means cheaper rates. Start shopping for long-term care insurance now and compare local companies to find the insurer with the best rates.

Type your zip code into the free long-term care insurance quotes tool today!

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