California has some of the highest costs in the country for long-term care. When designing a long-term care insurance policy, there are a number of important factors that will determine how – and when – the benefits are paid out.
One factor is the length of coverage and how many months or years the plan will pay before benefit dollars run out.
Another factor is the policy’s elimination period, or the number of days the policy owner must pay for care before the insurance benefits begin to pay.
Many insurance companies have also designed their long-term care plans to pay benefits based on either a reimbursement or an indemnity model.
Depending on the type of plan, this factor alone can make a big difference in the ultimate benefit received by the policy owner.
Reimbursement long-term care insurance policies, sometimes referred to as expense-incurred plans, allow the policyholder to choose the benefit amount when they initially buy the policy.
This type of plan reimburses the insured for actual expenses incurred, up to a fixed dollar amount per day, per week or per month.
For example, if a policy was originally designed to pay $100 per day in benefits but the actual charges incurred were $80, the actual charges of $80 would be paid and the additional $20 per day amount would go back into the policyholder’s pool of dollars to be used at a later time.
Indemnity plans will pay the policy owner a fixed amount of dollars per day up to a fixed amount of benefits, regardless of the expenses that are incurred.
Therefore, if the insured has a plan that is designed to pay $100 per day, but the care received actually only cost $80, the policy owner would still receive the full $100 from the insurance company.
Not all insurance companies offer both reimbursement and indemnity options on their long-term care policies. It is therefore best to check with each company prior to purchasing a long-term care insurance plan.