A Report on the Actuarial, Marketing, and Legal Analyses of the CLASS Program. Closer Look at Cash Benefits

10/14/2011

Table 3 shows the variation in the types of cash benefits offered. Of 13 policies with a cash component, nine have a cash benefit as a built-in feature of the product. Four offer a cash benefit only through a rider to the base policy. And three offer both a built-in cash benefit and an optional rider for an enhanced cash benefit. As noted previously, insurers tend to base the cash benefit on a percentage of either the monthly home care benefit or the monthly maximum for all levels of care if the policy has the same amount for all. Options range from 10% to 50%, but the most common percentage is 40%. Riders, however, tend to give insureds options for higher percentages, such as 50% and even 100%.

With built-in optional cash benefits, insuredsinform the insurer at claim whether they wish to receive cash. Most policies let the insured change between cash and reimbursement from month to month. Cash benefit riders typically must be purchased at time of application and cannot be added later even with underwriting. The insured is typically not permitted to receive other home care or facility benefits while receiving a cash benefit.

Many policies with cash benefits, whether built-in or offered through riders, do not place restrictions on how insuredsspend the cash, nor do they require that the insured prove receipt of care or services. Most policies with cash benefits reduce the overall pool of benefits “dollar for dollar,” though one insurer offers a cash benefit rider of 15% of the home care benefit over and above the other benefits and does not apply the cash payouts towards the overall pool. Most policies pay either cash or expense reimbursement, but one or two provide an additional small cash pool on top of the expense reimbursement (although the total amount paid is limited to the monthly maximum).

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