Having the proper insurance plays a crucial role in safeguarding our well-being as we age. Insurance provides people with financial protection and access to care services as the need arises. Two commonly used types of insurance are short-term and long-term care insurance. Both can be very helpful, but there are nuanced differences between these two types of policy. Here, we explain the similarities and differences between short-term and long-term care insurance.
What is short-term care insurance?
Short-term care insurance is designed to provide immediate coverage for temporary care services after unexpected health events, such as illnesses, injuries, and surgeries. Short-term care insurance typically covers a set duration, from a few months to a year, depending on the policy. It covers various care-related costs, including, but not limited to, rehabilitation, respite care, and assistance with activities of daily living (ADLs). Some benefits of short-term care insurance include:
- •Immediate coverage for unexpected events: Short-term care insurance offers rapid access to care services without a lengthy waiting period.
- •Lower premiums: Compared to long-term care insurance, short-term care insurance generally has lower premiums.
- •Flexibility in coverage options: Short-term care insurance policies often provide flexibility in choosing the level and duration of coverage to suit individual needs.
What is long-term care insurance?
Long-term care insurance is designed to provide comprehensive coverage for extended care needs. It covers a wide range of services, including assistance with daily activities, nursing care, and support in various care settings, such as nursing homes and assisted living facilities. As the name would suggest, long-term care insurance is designed to cover you for a longer period of time, typically one to five years. Longer terms are available, but note that most insurers limit how long they will cover services. Some positive aspects of long-term care insurance include:
- •Comprehensive coverage for extended care needs: Long-term care insurance ensures broad coverage for an extended duration.
- •Financial protection: It helps alleviate the financial burden associated with long-term care, which can be substantial.
- •Access to various settings: Long-term care insurance enables individuals to choose from different care settings based on their preferences and needs.
Differences between short-term and long-term care insurance
To help give you a better understanding of the differences between short-term and long-term care insurance, we’ve contrasted them in several areas below.
The application process
The application process for short-term and long-term care insurance differs in a few aspects. Short-term care insurance often has an easier and less involved application process. Applicants are usually asked to complete a form and provide pertinent personal and medical information.
Long-term care insurance often involves a more extensive application process. Insurers may require completing a detailed health questionnaire, medical records review, and, in some cases, a medical examination or assessment.
Triggers for coverage
Specific events or conditions, such as an injury, illness, or hospitalization, typically trigger short-term care insurance benefits. The policy may outline specific criteria that must be met for benefits to be paid.
Long-term care insurance benefits are generally triggered by the inability to perform certain daily living activities, such as bathing, dressing, eating, and mobility. The policy specifies the number of ADLs that must be impaired for the individual to qualify for benefits. In some cases, cognitive impairment may also be considered a trigger for benefits.
Length of time policyholders can receive benefits
The defining characteristic of each policy is the length of time you can receive benefits. Short-term care insurance coverage is typically limited to a few months up to a year. Once the coverage duration ends, benefits cease.
Long-term care insurance covers extended periods, usually one to five years or longer. As long as the individual meets the eligibility criteria for care needs, benefits continue to be paid. This extended coverage period offers greater protection against long-term care expenses.
Cost of premiums
Given the different nature of short-term and long-term care insurance policies, their respective costs tend to differ considerably. Short-term care insurance typically has lower premium costs than long-term care insurance, reflecting the limited duration of coverage.
Long-term care insurance premiums are higher due to the policies’ comprehensive and extended coverage. Factors like age, health status, coverage amount, and the length of the waiting period influence premiums.
Coverage limits
The benefit amounts also vary between short-term and long-term care insurance. Short-term care insurance benefits are often capped at a specific daily or weekly limit, typically between $100 and $200 per day.
Long-term care insurance benefits can vary widely and are usually tailored to the type of care the insured will receive. They provide a higher benefit amount to cover the costs of long-term care services, including nursing home care, assisted living, and home health care.
Best age to buy the insurance
The best age to buy short-term or long-term care insurance depends on individual circumstances. Short-term care insurance can benefit individuals of all ages, particularly those who want immediate protection for temporary care needs or those unable to qualify for long-term care insurance due to health conditions.
Long-term care insurance is usually recommended for individuals in their mid-50s to early 60s, when they are relatively healthy and premiums are more affordable. Purchasing it earlier allows for a longer duration of premium payments and greater access to coverage. It is crucial to assess your specific needs, financial situation, health status, and long-term care expectations to determine the most suitable age to purchase either type of insurance. Consulting with a financial adviser or insurance professional is a good idea before purchasing any insurance.
It’s important to account for the subtle differences between these two types of insurance, as the type of policy you buy can heavily influence your quality of life. With the knowledge provided above, you can ensure you’re getting the right type of coverage with adequate coverage limits. As with any type of insurance, you should consult a financial adviser or trusted insurance broker before purchasing.
