Indemnity vs Expense-Incurred Long-Term Care: What You Need to Know [2023]

The terms “indemnity” and “expense incurred” refer to how a health insurance policy addresses the total amount of your long-term health benefit. An indemnity insurance policy pays a fixed daily amount for long-term care, while an expense incurred policy reimburses you up to a certain amount you decided on when you bought the policy.

The pros and cons of indemnity vs. reimbursement for long-term care will depend on your health needs and the type of health insurance policy you choose. Indemnity plans will cost more upfront but provide more long-term health benefits. However, you can save money with an expense-incurred or reimbursement long-term care policy.

Long-term care coverage can be an important part of your health insurance program. Investing in it now can save you a lot of money on nursing home care and doctor’s bills in the future. Keep reading to learn more about indemnity vs. reimbursement long-term care insurance and how it can fit into your budget.

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.

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

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.

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.

LTC Insurance Company	LTC Benefit Amounts	LTC Benefit Period
Mutual of Omaha	$1,500-$10,000 per month	1-5 years
Nationwide	Varies	2-7 years
New York Life	$50-$400 per day	2, 3, or 7 years
Northwestern Mutual	$1,500-$12,000 per month	3 or 6 years
Pacific Life	Varies	2-8 years

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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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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