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Reimbursement vs. Indemnity

Long Term Care (Reimbursement) vs. Life Insurance with Chronic Rider (Indemnity)

What is Long Term Care?

Long-term care (LTC) involves a variety of services designed to meet a person’s health or personal care needs during a short or long period of time. These services help people live as independently and safely as possible when they can no longer perform everyday activities on their own.

Long-term care is provided in different places by different caregivers, depending on a person’s needs. Most long-term care is provided at home by unpaid family members and friends. It can also be given in a facility such as a nursing home or in the community, for example, in an adult day care center.

The most common type of long-term care is personal care—help with everyday activities, also called “activities of daily living.” These activities include bathing, dressing, grooming, using the toilet, eating, and moving around—for example, getting out of bed and into a chair.

Long-term care also includes community services such as meals, adult day care, and transportation services. These services may be provided free or for a fee.

Both traditional LTC and life insurance’s chronic rider benefits are typically triggered by an individual who is unable to preform at least 2 of the activities of daily living for 90 consecutive days.

The distribution of benefits is where traditional LTC and life insurance w/chronic rider policies differ greatly.

Benefit Distribution: Reimbursement vs. Indemnity


  • ONLY qualified expenses are reimbursed
  • One of the benefits of a reimbursement product is that clients receive a benefit equal to their total cost, up to a predetermined maximum
  • The downside is that there is a delay between when expenses are incurred and when benefits are paid out. Also, you will need to collect and submit receipts for the insurance company to review and approve.


  • An indemnity rider/product does not require you to provide proof that your benefit spending is related to the chronic condition. Therefore, you can use the benefit to pay medical or non-medical expenses or to enhance your savings.
  • There are no downsides to an indemnity reimbursement

—Albert Womble, Life Insurance Specialist, Wealth Watch Partners

September 2020

Sources: National Institute on Aging

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