There are fundamentally two ways for clients to receive benefits from a long term care insurance policy – as cash (indemnity) or via reimbursement. Which is better? Well, that depends upon which company you are listening to.
Carriers who only offer cash tout it as the ultimate in control and flexibility. “You don’t need to submit receipts…” and “you can use your money for whatever you want …” echo loudly.
Are those statements really true?
A bunch of you will never read beyond this point because you think that I am bashing cash indemnity policies. You are wrong. I am calling them out!!!
“Fisher,”, you might say, “you are jaded because your company doesn’t offer indemnity coverage.”
With Asset Care 2024, there is a cash option for informal care. I’ve shared that with you in past Fridays with Fisher. In fact, I even discussed our informal care provision and the Care Consultant benefit that is included in the policy.
To the point of submitting receipts, consider this you might not need to submit receipts to a carrier in order to receive a benefits check BUT you may need them at tax time to justify the monies received from the insurance policy.
Read that again, the carrier puts the full responsibility of compliance with the tax code on the shoulders of the insured and their family. And, remember, there is additional paperwork at tax time to be completed when cash benefits are received from a policy (specifically Form 8853). And, those indemnity payments may potentially trigger a situation where the caregiver is considered an employee (this would create other bookkeeping requirements).
There are different requirements at tax time between indemnity and reimbursement policies.
Have any of my peers shared that?
The “you can use the money however you want” statement is concerning. You’re telling me that there are no strings attached to the use of money for non-LTC expenses. Seriously, you say that I can go on a cruise using the money without any repercussions. Somehow, that doesn’t sit right with me.
Just a question to chew on – is this what the policy was really intended to do and what would the IRS say?
Again, someone will say, “Fisher, lighten up that’s not going to happen.”
It may happen – I’ve heard in meetings some of my peers from other carriers say just that “You can use the money however you want. Take a trip, buy a car, it’s your money.”
In my not-so-humble opinion, that is dangerous advice. And, again, the onus is thrown on the insured and their family to comply.
Now, I am not saying that cash indemnity is a bad thing. It is a tool just like any other tool and is appropriate in some situations while not the best choice in others. Every product has its place. All that I am saying is that too often, only the highlight reel is shared when discussing cash indemnity benefits.
And, remember this – OneAmerica Financial, with Asset Care 2024, offers cash benefits for informal care!
For more information about Asset Care 2024, you can contact my internal Kelley Hilliard directly at (844) 623-4251 or via email at kelleyhilliard.isp@oneamerica.com
Fridays with Fisher 