It can happen to anyone – an expected illness or accident that required a home health aide, a stay at a nursing home or assisted living facility. But, are you prepared financially for something like this? Do you have the necessary coverage to protect you and your family financially?
Short Term Care Insurance (STCI) is an insurance plan that can help protect your financial future and is a lower cost alternative to long term care insurance. According to the US Department of Health Human Services, at least 7 out of 10 people who reach age 65 will use skilled or custodial care someday.
STCI is a form of critical care insurance that functions much like long-term care insurance—except, as the name suggests, STCI is in effect for one year or less. It is also known as Home Health Care Insurance or Recovery Insurance. Policyholders who purchase STCI usually become eligible for benefits when they need assistance performing two or more activities of daily living (ADLs), such as eating, bathing and dressing.
For many people STCI is an appropriate and affordable amount of coverage. Plus, the majority of policies have a 0-day deductible (Elimination Period) and a full year of benefits. That means the policy pays on the very first day one qualifies for benefits.
Short-Term Care insurance is an Indemnity policy which means that the benefits are paid to YOU DIRECTLY, or to a medical provider you designate. As an indemnity policy, the benefits are paid in addition to any other health care coverage you may have.
It is important to know that these policies can pay in addition to Medicare—something a traditional long-term care insurance policy is prohibited from doing. Also, insurance companies generally don’t require the same comprehensive applications that are now commonly required to qualify for long-term care coverage.
The policies typically provide for a fixed level of daily benefits—around $140 per day is common (this can vary based on the benefits)—for a set time. However, with most policies, if the actual cost of care is less than the stated daily benefit, the remaining funds can be used to pay for care after the coverage time period has expired. For example, if the policy provides a daily benefit of $125 per day for 365 days, but the actual cost of care is $100 per day, the remaining $25 per day can be used to fund care on day 366 and beyond.
In general, STCI is worth considering for those who can’t afford or don’t qualify for traditional long-term care insurance policies. Since many illnesses that require some time in a nursing home or home health care (common services that are covered by STCI) are usually resolved within a one-year period, it is definitely worth consider STCI.
While long-term care insurance may provide the most comprehensive level, the cost can be prohibitive—and, in many cases, STCI can cover the actual cost of care much more efficiently at a lower cost than a traditional LTCI policy.