Reimbursement Model

Simply put, Reimbursement Model policies repay the insured for qualifying long-term care expenses that he or she incurred, subject to the amount of coverage purchased.

Reimbursement Example 1

Sandy purchases a Reimbursement Long-Term Care Insurance Policy with coverage of $150 per day. Sandy later needs Home Health Care services and the cost is $80 per day. Sandy's Reimbursement insurance coverage would reimburse her for her expenses and as a result she would receive $80 per day of qualifying services. The remaining $70 ($150 per day in coverage minus $80 paid in benefits = $70) remains with the insurance company and is available for Sandy's use down the road.

Reimbursement Example 2

Charles purchases a Reimbursement Long-Term Care Insurance Policy with coverage of $150 per day. Charles later needs Home Health Care services and the cost is $200 per day. Charles' Reimbursement insurance coverage would reimburse him for his expenses up to the amount of coverage purchased, and as a result he would receive $150 per day of qualifying services. Charles would be personally financially responsible for the remaining $50 ($200 per day in expenses minus $150 received in benefits = $50).

Tax Treatment of Benefits Received

For policies that pay benefits under the Reimbursement Model, the benefits received are considered to be a reimbursement for expenses incurred for medical services. This is true regardless of whether the Tax-Qualified Long-Term Care Insurancepolicy reimburses pays benefits on a daily, weekly, monthly or other periodic basis (IRC Sec. 7702B(a)). As a result, benefits under a Reimbursement Model are generally not considered income.