Indemnity LTCi Plans

Mar 4, 2016

  1. wc2624

    wc2624 Expert

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    Read an article online glowing about the wonders of indemnity plans. However said article didn't go into carriers who provide them which is pretty limited.

    I know Nationwide has both the Carematters and SULII rider "hybrids" and MOO and TransAm have cash benefit options.

    Are there others out there?
    wc2624, Mar 4, 2016
  2. ltcadviser

    ltcadviser Guru

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    Auto-Owners long term care insurance is indemnity.

    There are life insurance policies with accelerated chronic illness riders that are indemnity, such as Prudential.

    As you mention, Nationwide has the YourLife Care Matters policies. See link below.

    Nationwide Your Life CareMatters Long Term Care Insurance Review and Rating - LTC Partner
  3. Mr_Ed

    Mr_Ed Guru

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    New Jersey

    when you compare an indemnity plan with the reimbursement, side by side, 9x out of 10 the reimbursement makes more sense.
    Mr_Ed, Mar 4, 2016
  4. Arthur Rudnick

    Arthur Rudnick Moderator Moderator

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    New York
    originally posted by Mr_Ed

    I have never heard you endorse an indemnity policy. I personally have a UNUM Total Home Care policy, which is a 100% cash-indemnity policy, pretty much the same as MedAmerica's Simplicity, which I sold a boatload of.

    The only downside to an indemnity policy compared to reimbursement that I can think of is the increased cost.

    But, for those who can afford it and want the freedom of doing anything that they want with the cash, it seems to me to be a no-brainer.

    Also, with a cash-benefit policy, there are no claim forms or receipts to fill out and submit, which is a major benefit to someone who is elderly and on claim.

    I wrote this a few years ago and I still think it's appropriate today.
    So, what's your beef with indemnity plans, other than the additional premium?



    Long-Term Care Insurance has emerged as one of the most sought-after health coverage’s today. The popularity however, also means that more insurance companies have joined in the fray to profit from this evolving sector. Each contract can be substantially different not only in it’s price structure, but in it’s contract provisions as well.

    One area that often causes misunderstanding is how payments are made at the time of claim. If you fulfill your obligation by paying premiums, wouldn’t you like to know how you would get paid in the event of a claim? The two methods of paying benefits at claim are Reimbursement and Indemnity, with some long-term care companies offering hybrids of the two.

    A Reimbursement Policy works like your health insurance. If you qualify for payments under the contract, you will be reimbursed for them, up to your policy limits. Similarly, if your long-term care expenses qualify for coverage under the contract, the insurance company will reimburse those actual expenses, paid up to the daily, weekly or monthly payment methods described in the contract.

    Indemnity contracts are more consumer friendly and work like most disability insurance policies. In short, once you qualify for benefits, the company will pay the full periodic benefit amount, regardless of the actual cost of your care.

    There are two main factors that make this benefit so important. The most obvious and significant one is what we ironically call the “Greed Factor”, since you may actually receive more money than your care expense. For example, if you purchased a $7,500 per month indemnity contract and a home health aide visits your home for a few hours a day and bills you $2,500, you would receive the full $7,500. Conversely, if you had purchased a Reimbursement Contract, your check from the insurance company would be for no more than $2,500. In other words, with the Indemnity Contract, you always get what you pay for.

    Keep in mind that Tax-Qualified Policies only allow up to $290.00 per day (in 2010) on a tax-free basis. Higher daily benefits qualify tax-free as long as your actual expenses meet the amount of benefit received. Therefore, if you received $300.00 a day in benefits and could substantiate $300.00 a day in long-term care expenses, there would be no tax issue. However, if you could not prove the entire amount, anything over $290.00 per day in benefits would be considered taxable income. The $290.00 amount increases each year according to indexes set by the federal government. Most people would rather have additional benefits and pay taxes, than not receive them at all.

    The second point is that Indemnity Contracts tend to save time and energy for your loved ones. A long-term care situation is hard on all family members. The last thing you want is added aggravation from the claims process that can take away from the support systems your family may be relying on. Remember you’re buying these policies to protect yourselves emotionally as well as financially. The payment of the benefits from the indemnity policy is contingent solely upon proof that contractually approved conditions are being met. The concerns over contract language regarding whether medications, beautification, paying someone to mow the lawn, and other necessary “extras” covered are diminished, if not defeated.

    Companies offer indemnity benefits in different ways. Some include them in the base contract, while others offer them as a rider. With a rider, you can expect an additional premium, but total outlay is usually comparable to those policies that include the indemnification benefit.

    Finding this type of contract in the past was difficult, with Unum/Provident being the pioneer. Today there are other providers in New York to consider, including Metropolitan Life, MedAmerica and Prudential. John Hancock’s policies offer an additional indemnity on what is otherwise a reimbursement contract.

    When shopping for long-term care coverage a company’s size, strength and reputation is the foremost items to consider. Although we believe in the superiority of indemnity policies, we would rather see a client purchase a reimbursement policy from a quality stable company than an indemnity policy from a small, inexperienced carrier.

    • Arthur D. Rudnick, LTCP • New York Long Term Care • 109 Winding Ridge Road • White Plains, NY • 10603 •
    • 914-946-5695 • [email protected] • ​
  5. ltcadviser

    ltcadviser Guru

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    There is no downside to indemnity.

    15 years ago there was 10% spread to move from reimbursement to indemnity with underwriters that had the option. (Met Life, etc.).

    Then, pricing spreads increased to 30%-35% with companies that had the option (MedAmerica, etc.).

    Now, there just isn't the availability of underwriters in the mass market that offer indemnity.