May 5, 2024

Written by Jack Lenenberg

On the surface, you may believe that long term care insurance policies will operate in the exact same way when you reach the point in your life that you need to receive care.

As you may already be aware of, your long term care insurance policy will pay benefits to you if you are chronically ill.

Satisfying the definition of Chronically Ill will mean that you either 1) can not perform 2 of 6 Activities of Daily Living (ADLs) without assistance from another individual OR 2) you have been diagnosed with a severe cognitive impairment such as Alzheimer's or dementia, and you need verbal reminders to help keep you safe.

When you reach the point in your life that you are chronically ill, your long term care insurance benefits will begin once you submit an approved Plan of Care to your insurance company.

All policies will require written certification from your doctor that you are chronically ill and a written Plan of Care before you will receive your monthly benefits.

Now, what if it is your plan to stay at home and be cared for by members of your family?

If you are like most people, this may be your wish.

How will your long term care insurance policy help you in this situation?

Well, it will depend upon one very important distinction.

Did you decide to purchase a reimbursement LTC policy or a cash indemnity LTC policy?

If you elected to buy a cash indemnity policy, you will be fully covered. If you elected to buy a reimbursement policy, you may not receive any benefits yet.

Thus, cash indemnity benefits is an important benefit for you to consider when deciding upon which long term care insurance policy to buy.

Cash indemnity vs. reimbursement policies

Most long term care insurance policies have traditionally been reimbursement models.

With reimbursement policies, you will reimbursed for your qualified long-term care expenses up to the monthly LTC benefit amount that that you purchased. Invoices and receipts for care must be submitted to the claims office in addition to a proof of loss form each and every month. The claims office will review your receipts and reimburse you for paid qualified care only, which may or may not cover your actual out-of-pocket expenses.

If you have a $7500 monthly benefit, and you submit receipts for $5000 of qualified paid care expenses, you will receive $5000, and the $2500 difference will remain in your policy benefits to be able to be claimed at a later point in time.

With reimbursement policies, qualified expenses will require paid care to a formal professional caregiver or a facility.

Care at home by family members or friends will be specifically excluded with reimbursement models.  This is considered informal care.

Contrast this approach with cash indemnity policies.

Cash indemnity policies will pay your maximum monthly benefit to you each month regardless of actual expenses incurred.  

No receipts or proof of loss forms are required to be submitted.

All informal care for you is covered, including care by your family and friends. You will be able to control the benefits dollars to be used as you see fit, whether it's for caregiving, housekeeping, medical expenses not covered by insurance, or anything else.

If you own a $7500 monthly LTC benefit, you will receive $7500 month, no questions asked. 

My mother-in-law Anita's long term care policy requires the submission of receipts. She is currently in assisted living here in Alpharetta, GA, so we receive a monthly invoice every month that we submit to the claims office. This is as easy as it gets with reimbursement models because we know her room and board is fully covered as a qualified expense and we will never have any rejection of our claim. Still, inevitably a fax wasn't received and we need to resend and follow up. It is common for our reimbursement check to arrive 6 weeks after we paid the facility.

Do we receive our benefits? Yes 100%. Is it a hassle and time waster sometimes. Sure.

Cash policies will offer you maximum flexibility for your caregiving needs. No hassle. No BS.

So, now that we have determined that cash indemnity policies are generally best for you if available, you might be curious as to which companies offer cash indemnity benefits.

Well, today we only have less than a handful of policies with 100% cash indemnity benefits, although I believe the market will start moving gradually in the direction of the reimbursement insurance companies improving their policies to better compete.

Current Availability Of Cash Indemnity Long Term Care Policies

Today, unfortunately we have zero availability of cash indemnity policies if you want to buy a traditional stand-alone long term care policy.

MedAmerica, Prudential and MetLife used to offer traditional cash indemnity LTC policies, but they have all left the arena. Our current traditional LTC policy underwriters are Mutual of Omaha, New York Life, National Guardian, Thrivent, Northwestern Mutual and Bankers Life.

Each of these policies are reimbursement models.

If you want cash indemnity benefits, you will have to focus on the hybrid asset-based LTC policies. The good news, however, is if you are like most of my clients today, you might be more attracted to the hybrid long term care policy, anyway.

Hybrid policies provide long term care benefits if needed, a life insurance benefit to your estate, if care is not needed, and a cash value return of premium if you change your mind. Additionally, the hybrid LTC policy premiums are guaranteed.

Traditional policies have no cash value, and the premiums are generally not guaranteed and may be susceptible to rate increases, if needed.

So, there are a lot of advantages to the hybrid policies.

The currently available 100% cash indemnity policies are the following policy series. If you are seeking 100% cash indemnity benefits, these will be the policies for you to target and explore. (Please note, there are also some policies that will provide you with a reduced monthly LTC benefit if you want cash, but will not pay 100% to you)

Nationwide CareMatters 

Securian SecureCare (finally coming to California in 2 months!)

Brighthouse SmartCare (will be revised and improved in 2 months)

Let's take a closer look at each of these 3 policies to help you to understand where they might best fit for you.

The Nationwide CareMatters Policies

Nationwide CareMatters is presently the best selling hybrid policy in the country, and deservedly so.

Nationwide offers individual long term care policies as well as a joint life policy for couples, the CareMatters Together policy.

The individual plans are best designed with buying benefit periods of 6 years or 7 years of coverage.

The joint plan is best designed with buying 8 years to share.

Almost always, the plans are best designed with including automatic inflation protection.

Payment plans with Nationwide are extremely flexible. You may pay a single premium or spread premiums out 5 years, 10 years, 20 years or to age 65 or 100.

Many policies will not pay LTC benefits to you for the initial 90 days. Nationwide will retroactively pay day 1 long term care benefits to you for satisfying the 90 day elimination period.

Additionally, its residual guaranteed minimum death benefits on the CareMatters II individual plans are the highest in the industry.

I find that the Nationwide CareMatters policies are generally best priced for younger applicants, ages 40-60.

For international coverage, Nationwide provides 100% of benefits for 2 years on individual policies, 3 years on the joint policy.

The underwriting is very streamlined (digital online or telephone interview only), and decisions can be very quick, within 5 days if you are healthy. Medical records will be ordered if needed.

I have been receiving exceptional underwriting decisions from Nationwide over the past 12 months. It has greatly improved its efficiency and process this past year.

The Securian SecureCare Policy Series

Without a doubt, Nationwide's primary competitor is the Securian SecureCare policy.

For now, Securian only has individual policies available, although I believe Securian intends to release a joint policy at some point, as well as introduce a plan that will accept IRA funds (Looking at targeting you, OneAmerica!)

I find Securian is priced really well for applicants in their 60's, as well as for single female applicants.

Payment plans are flexible, single pay, 5 pay, 7 pay, 10 pay and 15 pay.

One nicety - Securian offers an 8 year benefit period option, the longest benefit period option of all LTC policies except OneAmerica (reimbursement) which still offers Unlimited long term care benefit periods!

Securian is priced best with electing benefit periods of either 6, 7 or 8 years in my opinion.

Securian, however, will not provide any benefits during the 90 day elimination period.

For international coverage, the entire policy amount is available overseas, but only at a 50% payout.

For example if you purchased $10,000 month for 6 years and you move to India, you would receive $5000 month for 12 years.

Underwriting with Securian is also streamlined, generally only a telephone health interview is needed. Medical records may be ordered when needed.

Of the 3 cash indemnity underwriters (Nationwide, Securian and Brighthouse), I currently find the underwriting to be the most stringent with Securian. This is not to say its underwriting is unfair, however it may be the tightest.

The SecureCare policy is certainly an excellent alternative to Nationwide for you to consider.

The Brighthouse SmartCare Policy Series

Brighthouse SmartCare is the 3rd 100% cash indemnity policy in the arena.

Presently the Brighthouse offering is not as flexible as Nationwide or Securian.

Brighthouse offers benefit period of only 4 years and 6 years as options.

Up until now, Brighthouse has not offered 3% compound inflation protection which has really hurt its attractiveness. This July, it is adding 3% compound.

The SmartCare plan only offers installment payment plans up to 5 years presently. When Brighthouse elects to offer a 10 Pay option, it should see its attractiveness to consumers improve. 

The one advantage Brighthouse does have over Nationwide and Securian is Brighthouse will allow 100% of your benefits to be used internationally outside the US. If you know you will be retiring overseas, Brighthouse now will be your best option.

A 2nd specific advantage Brighthouse has is for New York residents. Offerings in NY are limited, and not without compromises. Brighthouse does have an offering in NY that might have appeal for New Yorkers.

Additionally, Brighthouse will underwrite differently than Nationwide and Securian, and may accept some risk that Nationwide and Securian will not.

So, Brighthouse has its place, however to date it has never been the first cash indemnity LTC option for many of my clients.

Now, with the repricing of the Brighthouse policy this July, and the addition of 3% compound inflation, maybe the attractiveness of Brighthouse as a primary solution will change.

I have more detailed reviews of all of these cash indemnity policies on my website blog if you want to dig deeper, but I hope these thumbnail summaries for you are helpful.

Final Thoughts on Cash Indemnity Long Term Care Benefits

There are many LTC policies that are reimbursement only. I do not feel that the reimbursement model is a dealbreaker, at all. My mother-in-law's traditional LTC policy is reimbursement and we do receive our benefits every month. If you are seeking a traditional LTC policy today, you will have to be okay with the reimbursement of your benefits, because presently we have no other options on stand-alone LTC policies.

Additionally, if you want to own a long term care policy that provides you with Lifetime Unlimited LTC benefits, you will also have to compromise and be comfortable with the reimbursement model because presently the only underwriters that offer Lifetime LTC benefits are reimbursement, although OneAmerica will be blending in a very limited amount of cash indemnity (75% cash for 33 months I believe) on its Asset Care policy this fall. Certainly this is a reasonable compromise to also obtain Unlimited coverage.

If, however, you are not seeking the above options, and you want to specifically buy a hybrid LTC policy with limited benefit periods  (4-8 years, for example), then undoubtedly you should try to focus on buying a cash indemnity policy if you can - simply because in this space, the cash indemnity benefit is available for you, and the overall pricing with the reimbursement hybrid models should be close enough that the flexibility the cash indemnity policy will provide you may be valuable.

The cash indemnity policy will provide you with full benefits when you are receiving care at home provided by a family member or a friend. You may have a cognitive impairment such as dementia or Alzheimer's and need a sitter.  Often, informal home care is provided for individuals with cognitive impairments. My stepmother Mimi was placed in memory care last October, but her sister Fredi was her primary caregiver for 6 months prior to us moving Mimi into memory care. The cash indemnity policy will have provided benefits to Mimi 6 months earlier than the reimbursement policy.

Another advantage of the cash indemnity policy is it eliminates needing someone in the future to be available to submit receipts on your behalf each month for reimbursement. Sure, you may have children that can step into this role in the future and do this for you. We presently do this for my mother-in-law Anita. And possibly your insurance company may have concierge services that will obtain the receipts for you. With cash indemnity policies, however, it will be one less issue for you to worry about. Your maximum monthly benefit will be automatically deposited into your checking account each and every month.

So, all things being equal with pricing and coverage levels, if you are healthy enough to get approved with one of the aforementioned underwriters there really would not be a need to select a reimbursement policy over a cash indemnity policy.

Start Planning For Long Term Care Today

I will be pleased to help you research your options and provide you with the best objective and unbiased advice. Please call me at (800) 891-5824 to get started.  Or you may book a call with me online.

Thank you for reading my blog.

Jack Lenenberg, J.D.