Understanding Short-Term Care Insurance Plans

What Are Short-Term Care Insurance Plans?

Short-term care plans fill the need for those who want some protection but are too old, too unhealthy or not wealthy enough for long-term care insurance. The downside is that short-term policies only cover care for a year or less, limiting how much they pay out per day or week.

Policies pay for care when the insured can’t perform at least two of six activities of daily living without help — eating, bathing, transferring in and out of a chair or bed, dressing, toileting and continence — or has a cognitive impairment.

Although the policies are more affordable than long-term care insurance, you get fewer benefits.

Let’s look at the pros:

• One big benefit of short-term care plans is that people have an easier time getting insured. It’s a great planning option for those who only want a home care benefit.
• The typical short-term care insurance policy provides coverage for one year or less. Almost half — 49% — of long-term care insurance claims last one year or less. The policies pay on the first day that you qualify for benefits. Most traditional long-term care insurance policies — about 94% — are sold with a 90-day deductible that must be met before benefits are paid.
• These policies pay in addition to Medicare, something a traditional long-term care insurance policy is prohibited from doing.
• Policies accept applicants at much older ages than long-term care insurance does — potentially to age 89 — and have simpler medical underwriting, with mainly yes/no answers to health questions.

And here are the negatives:

• The median annual cost of a private room in a nursing home in Connecticut is a little over $150,000. The yearly cost of $22,880 for a home health aide is based on an estimate of four hours per day, five days per week. Someone with financial assets of $200,000 or more could cover the costs themselves for a few months, some experts point out.

• The real risk is a need that lasts years. People with limited assets typically qualify for Medicaid and don’t need extra insurance. Even Medicare will cover short-term care at home and in a facility, depending on the specifics. For example, if you need home care to recover from an injury or illness, Medicare will pay for a home health aide for up to 60 days and can even extend that period if warranted. So, you may already have the coverage you need.
• Short-term policies aren’t easy to find. Some states ban the policies from their insurance markets in part because the benefits are considered too limited. Even where the policies are legal, many insurers don’t want the hassle of offering them.

Despite their limitations, short-term policies serve a purpose. Most people have nothing for this type of coverage, and a year is better than nothing. Here are some considerations before buying the policy:

• Were you or a spouse declined for traditional long-term insurance?
• Are you looking for a less expensive option than long-term insurance?
• Did you wait too long to buy long-term care insurance and are finding that now the cost is too high?

You can use the short-term care policy to cover the elimination period of a long-term policy. The typical person who buys short-term care insurance is between the ages of 65 and 74 and has a net worth of less than $500,000, according to the Association for Long-Term Care Insurance.

Of course, this is just a summary of a complex product that may have variations. When buying any kind of insurance, work with trusted financial and legal professionals and read all the fine print.

NOTE: At the time of publication, there is one approved short-term care plan available in Connecticut. For information, visit https://portal.ct.gov/CID/Life-And-Health/Individual-Short-Term-and-Long-Term-Care-Policies-Approved-In-Connecticut .