Short-Term Care Insurance: Is It Right for You?
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You may have heard of long-term care insurance. It pays for help with routine activities such as eating, bathing or dressing — at home or in assisted living or nursing facilities — when you can’t take care of yourself during an illness or disability.
But you may not have heard about short-term care insurance, which pays for the same types of services for a year or less.
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The trouble with long-term care insurance
Long-term care insurance helps people pay for extended periods of custodial care, which Medicare and other health insurance policies don't cover. People typically buy long-term care coverage in their 50s and 60s, according to the American Association for Long-Term Care Insurance (AALTC).
But the past two decades have been a bumpy ride for long-term care insurers. Claims rose more than they projected and their payouts were costlier. The companies also make money by investing the premiums customers pay, but low interest rates after the 2008 recession hurt their bottom lines.
Today, long-term care insurance companies typically offer less generous benefits for prices that are higher than a decade or two ago, and they are picky about who can qualify for new coverage.
Short-term vs. long-term care coverage
Insurance for short-term care is cheaper than for long-term care because it provides coverage for less time, from a few days up to a year, versus more than a year for long-term care insurance. You choose the coverage amount when you buy a policy.
It’s also easier to qualify for short-term care insurance. The application doesn’t require a medical exam, and some companies only ask a handful of yes-or-no health questions. In addition, you can apply at older ages. The cutoff age to buy short-term care coverage typically is 89, while for most long-term care policies, it’s 79.
Long-term policies feature an “elimination period,” the number of days you pay for care on your own until the policy starts paying. A typical elimination period is 90 days.
Short-term care insurance generally pays out benefits immediately.
People with long-term care coverage can use short-term coverage as a supplement, covering the cost of care during the long-term care policy’s elimination period.
Others may choose short-term care policies because they were turned down for long-term care insurance or can’t afford its higher premiums.
For short-term coverage, a 65-year-old applicant would pay about $63 a month for a one-year policy with a $1,050 weekly benefit for at-home care, according to 2024 rates calculated by the AALTC. For a 75-year-old applicant, the same coverage would cost around $133 a month. Pricier options add coverage for nursing home stays.
About half of all long- term care insurance claims last a year or less, according to the AALTC.
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Shop carefully
Consumer advocates have raised concerns about short-term care insurance because state regulators don’t hold the product to the same standards as long-term care insurance. Less regulation means fewer guaranteed consumer protections.
Short-term care coverage can vary by state, and policies are not available in all states.
Follow these tips to shop:
Get quotes from different insurers.
Read the fine print in the policies to learn exactly what’s covered.
Decide what you can pay in out-of-pocket expenses and the amount of insurance coverage you will need.
Also note that it’s wise to plan for more than the three to six months that some short-term care policies cover. The need for care typically lasts about three years, according to the Administration on Aging, part of the U.S. Department of Health and Human Services.
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