As you get older, the chances increase that you or your loved ones will need some type of long-term care. In fact, the U.S. Department of Health and Human Services (HHS) projects that nearly 70% of people turning 65 today will need some type of long-term care services during their lifetime. If you're considering getting insurance to help cover assisted living, in-home care or nursing home costs, understanding the difference between long-term and short-term care insurance can help you make the right decision.
A short-term care policy is a form of long-term care insurance that provides benefits for 12 months or less. Some insurers may refer to short-term care insurance as recovery care or convalescent insurance, and as far as the insurance industry and regulators are concerned, short-term care insurance is just a particular kind of long-term care insurance.
However, there are some key differences between short- and long-term care insurance besides the length of coverage. The two also differ in their costs, benefits and the starting time for those benefits.
Consider the Costs
If saving money is important for you, a short-term care policy could be your best bet. Premiums for short-term care policies are often significantly lower than for long-term care options because insurers usually charge less for shorter-term coverage. They can do so because it represents a lower financial risk to them.
In addition, short-term policy rates aren't sex-based, unlike long-term policy rates. With long-term care insurance, females typically pay more than males because of their longer average life span: A 2019 price index from the American Association for Long-Term Care Insurance confirms that single females paid an average annual premium of $2,700, compared to $2,050 for single males.
Balance the Benefits
Long-term care insurance typically helps pay for personal and custodial care in a variety of settings such as your home, a community organization, or other facility, according to HHS. There's also usually a range of options for the amount of coverage you purchase.
If you're worried about not using all your benefits, most short-term policies will allow you to reset your benefits for the future if you don't use them all within the coverage period you pay for. Don't count out long-term options entirely, however — some long-term care policies will restore any unused benefits if your recovery takes less than a year.
Meanwhile, if you have Medicare, you can use your short-term care policy to supplement Medicare's limited nursing home benefits. You can't do the same with a traditional long-term care policy.
Plan Around the Start of Coverage
If you'll need funds immediately to pay for recovery care after an accident, sudden illness or emergency surgery, short-term care is the way to go. Most traditional long-term care policies impose a 90-day waiting period (also called an elimination period) before they start paying benefits, while most short-term care benefits kick in as soon as you incur a covered expense.
Reasons to Buy Short-Term Care Insurance
A short-term care policy may be the right choice if:
- The cost of traditional long-term care insurance is no longer affordable because of your age.
- You've been denied long-term care coverage because of your health condition.
- You have a traditional long-term care policy but need some protection during its elimination period.
- It's an issue for you that Medicare doesn't cover short-term recovery, rehabilitation and nursing care.
Reasons to Buy Long-Term Care Insurance
A long-term care policy may be the best option if:
- You're in your mid-50s or younger. As outlined by HHS, long-term care insurance premiums can vary greatly based on your age at the time of purchase.
- Your current health is good enough that you qualify for a traditional long-term policy.
- You need coverage for future chronic health needs that may last years and want to reduce the out-of-pocket costs for you and your family.
If you or a loved one need long-term care, insurance can help keep the cost from depleting you or your family's assets. Take the time to review short-term care policies in addition to traditional long-term care options so you can figure out which is the ideal fit for you. You can also contact an insurance provider to discuss the options that best fit your financial and retirement goals.