If you’ve ever bought a life insurance policy, the agent probably told you that sooner is better than later because the cost of coverage increases each year you get older. Growing older has its benefits, but the cost of life insurance isn’t one of them.
The same is true for long-term care insurance — if you can get it. According to the American Association for Long-Term Care Insurance, these are the percentages of applications declined, by age band, in 2019 by insurance companies that sell long term care coverage:
- 49 or younger: 16%
- 50 to 59: 21%
- 60 to 64: 24%
- 65 to 69: 32.5%
- 70 to 74: 44%
- 75 or older: 51.5%
Without long-term care insurance, people who were declined will need to find the money elsewhere to pay for care when they need it. Their options are limited: family, Medicaid, personal savings, veteran benefits, an HSA plan, or adding a rider to a life insurance policy. Unfortunately, many Americans can’t exercise these options either.
There is one option left that an increasing number of people are turning to as they get older: short-term care insurance.
In this article, we’ll delve into:
- What short-term care coverage is
- How it works
- The cost of coverage
- Short-term care vs. long-term care features
- Who should consider it — and why
Short-term care policies are aptly named since the typical policy provides coverage for one year or less. For many people, this is an ample amount of time.
Most short-term care policies have a zero-day deductible (elimination period) and provide a full year of benefits. Comparatively, 94% of long-term care policies issued carry a 90-day deductible that must be satisfied before a dollar in benefits is paid.
Qualifying for short-term care insurance is not nearly as strict as it is with long-term care insurance. Most short-term care applications have only 7-10 health questions, and some insurance companies only ask two “Yes” or “No” questions, making short-term care ideal for people with pre-existing health conditions. No medical exam is required when applying for a short-term care policy.
Triggering events for short-term care policies are generally the same as they are for long-term care policies. This means that benefits will be paid if the insured isn’t able to perform at least two of six “activities of daily living” without assistance:
- Transferring in and out of a chair or bed
- Or has a cognitive impairment
When applying for a short-term care insurance policy, the applicant selects a daily benefit amount in increments of $10. Typical benefit amounts are $100, $150, and $200 per day. The minimum age to apply for a short-term care policy is age 40 or 50. The maximum age is typically 85-89, which exceeds the eligibility age of long-term care policies that are usually issued up to age 75.
Even a short stay in a nursing home or an extended care facility can quickly add up to thousands of dollars.
Research by LongTermCare.gov revealed these costs as indicative of the national average:
- $225 a day or $6,844 per month for a semi-private room in a nursing home.
- $253 a day or $7,698 per month for a private room in a nursing home.
- $119 a day or $3,628 per month for care in an assisted living facility (for a one-bedroom unit)
- $20.50 an hour for a health aide.
- $20 an hour for homemaker services.
- $68 per day for services in an adult day care center
Short-term care may not cover 100% of the costs for a stay in a nursing home or assisted living facility, but someone who chooses a $200 per day benefit would recoup $6,000 of these expenses for care.
Someone on Medicare can also benefit from having a short-term care policy. Short-term care policies pay in addition to Medicare; long-term policies don’t.
- The typical premium at age 65: $105 per month
- The typical premium at age 70: $141 per month
Many older couples apply for short-term care policies because they waited too long to buy long-term care insurance, and the cost has become prohibitive. Kiplinger reports that a 60-year-old couple can get a short-term-care policy that provides $150 in daily benefits for up to 360 days, with a 30-day elimination period, for $1,235 annually. The same couple’s premium would be $2,170 a year for a long-term-care policy that provides the same daily benefit for up to three years, with a 90-day elimination period.
Learn More: How Much Does Long-Term Care Insurance Cost?
Short-term care insurance is an affordable option for many people. It complements long-term care insurance well by providing protection during the 90-day elimination period some policies have. It’s also helpful for people who are priced out of long-term care coverage because they waited too long.
Though some long-term care claims have a duration of many years, about half of long-term care claims last under one year, according to the National Short-Term Care Advisory Center.
The American Association for Long-Term Care Insurance advised that people who may be good candidates for short-term care insurance include:
- Someone who was declined for traditional long-term care coverage
- An individual who wants a more affordable option to traditional long-term care insurance
- A senior citizen over 75 years old
- Someone who wants to cover the elimination period in their long-term care policy
- A person who wants to have a limited number of health questions on the application for coverage
- Someone who doesn’t want to have a medical exam
Short-term care insurance might fit nicely into your plans for financial protection. You can find the best policy to meet your needs by researching companies carefully and examining what each company’s policy covers and doesn’t cover. Look at each company’s complaints history, and decide how much you can pay for care out of your personal savings before determining how much coverage you’ll need.
Having grown up in upstate New York, Bob Phillips spent over 15 years in the financial services world and has been making freelance writing contributions to blogs and websites since 2007. He resides in North Texas with his wife and Doberman puppy.
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