What is the difference between a reimbursement and an indemnity long-term care insurance policy option? Robert 'Bob' Powell answers this question as part of Decoding Retirement's special segment, Ask Bob.

Mitlin Financial founder and wealth advisor Lawrence Sprung joined Robert 'Bob' Powell on Decoding Retirement to discuss the latest inflation numbers, the Tax Cuts and Jobs Act (TCJA), the current housing market, "finfluencers" and AI's impact on personal finance, and much more.

Question:

I’m looking to buy a long-term care insurance policy. One policy has a reimbursement option and the other has an indemnity option. What is the difference between the two?

Answer:

The reimbursement option pays back the policyholder for approved long-term care expenses they have paid during the month. The care provider can either bill the insurance company directly, or the policyholder can pay upfront and then submit receipts to get reimbursed.

With the indemnity option, the insurance company sends the policyholder a fixed monthly payment, no matter how much the care actually costs. To qualify, the policyholder must receive approved long-term care services. The policyholder then uses the money to pay for the care themselves.

Which is better? Scott Olsen, co-owner of LTCShop.com, offered up the following: "Most of my clients buy reimbursement policies. Reimbursement policies are usually less expensive than indemnity policies. The only time an indemnity policy is better is if someone wants to use a non-qualified caregiver to provide their care... Like a family member or an unlicensed home health aide."

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Yahoo Finance's Decoding Retirement is hosted by Robert Powell, and produced by Zach Faulds and Alexander Frangeskides.

Find more episodes of Decoding Retirement at https://www.perfectloveletters.com/videos/series/decoding-retirement.

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Editor's note: This post was written by Zach Faulds.