How Does Long Term Care Insurance Really Work?

Long Term Care Insurance

Well, we’re half way through November so let’s stick with topic of long term care since it’s National Long Term Care Insurance Awareness Month. I think the most common basic question for long term care is “How Does It Work”? When you break it down, there are only really two ways that long term care insurance pays out as a benefit.

The first and most common is called “reimbursement”. You have to remember the primary reason for owning long term care insurance is to stay in your home when you are sick, as long as possible, until it’s no longer feasible to get the care there. Oddly enough, the bulk of long term care claims are actually paid for in-home care. So once you’re able to trigger the long term care insurance policy, you will rely on a home health care agency for their services.

They will send either a home health aide assistant or a certified nurse assistant to the house to help out. You will then be billed by the agency, and in turn submit that bill to the carrier to be “reimbursed”. This usually occurs within a 30 to 60 day cycle.

The second method is called “indemnity” or a “cash” benefit. It functions exactly as it sounds. Once you’re able to trigger the policy, the insurance carrier would cut you a check for your monthly benefit. The advantage to this plan is you don’t have to keep “receipts” for the services to be reimbursed. You’ll see that there are few carriers offering these types of plans anymore, and if anything, they’re only offering a “partial” indemnity approach. It’s still a great benefit because when you’re in a “reimbursement” mode, you have to use a licensed professional by the state. If you take the cash, then cash is king and you can pay anyone you want, even a family member or friend.

I think one of the other confusing issues is what it takes to be able to put in a claim for long term care. In the end, we’re either going to be failing physically, cognitively or a combination of the two. When this happens, you can trigger your policy and start the claims process. For it to be a physical issue, you have to be failing on two of the six “assisted daily living activities”. These are dressing, bathing, eating, toileting, transferring and incontinence. As long as you’ve been clinically diagnosed by a doctor to be failing on two of these, you can put in an insurance claim. From a cognitive standpoint, as long as you have been clinically diagnosed with either Alzheimer’s or Dementia, you can put in a claim.

When you hear complaints about long term care insurance, it’s usually because people don’t understand how the policies work, or how to trigger the benefits. So celebrate National Long Term Care Insurance Awareness Month and let's get started today!

About the author: Mark Yurkovic has been in the life insurance business for over 12 years, and holds CLTC, LUTCF, and CES designations. He enjoys building remote control boats, and playing instruments including the piano, guitar, banjo, and mandolin. Mark would love to discuss life insurance options and work towards finding the best policy fit for your family. You can contact Mark at 1-800-651-1953 or