Imagine if you had an accident and broke your leg. For a few weeks or months, until you adjusted to the cast, crutches and your new physical limitations, it would be almost impossible to move around and do all the things you normally do. The older you are when it happens, the harder it will be for that adjustment to occur. In the meantime, in order to do your shopping, bathe, dress yourself and prepare food, you might need to get some assistance. You could rely on your family members to adjust their daily schedules in order to help you with these tasks, or you might pay someone to come in and help—but only if you can afford to.
This situation, and worse, faces all of us as we head into our senior years. For many, a long-term care policy takes away some of the burden of finding—and affording—nonmedical care after an accident or injury. But no matter how you design the policy, it simply isn’t easy for every senior or preretiree to afford long-term care insurance premiums. Luckily, there is something called a short-term care insurance policy that can make a major impact on the way you pay for and receive nonmedical care when needed in the future.
What Is Short-Term Care Insurance?
Short-term care insurance provides a benefit similar to long-term care insurance but with a much shorter maximum benefit period. While long-term care insurance can provide insurance coverage for years of assistance with activities of daily living, a short-term care insurance policy might provide benefits for no longer than one year. This makes premiums more affordable for even the most stretched budget and requires no sacrifice to benefits themselves, just the maximum term of the policy.
How It Works
Generally, depending on the policy, when you need assistance with two or more of the six activities of daily living (which include bathing, dressing, feeding yourself and toileting) or you at least need substantial supervision to conduct these activities, you may qualify to receive short-term assistance in a facility or at home.
Short-term care policies generally have an elimination period, which is the number of days between the time that you need assistance and the policy begins to pay for that assistance. Elimination periods for short-term care insurance policies do not generally exceed 20 days. During that time, expenses for care provided are paid out of your own personal savings. In addition, each policy will have a maximum daily benefit, which can range from $50 a day to a few hundred dollars a day. Anything in excess of this amount is, once again, paid out of personal savings and assets.
Added Benefits for Short-Term Care Policies
Short-term care insurance policies feature many of the same additional benefit options as long-term care policies. You can select an inflation protection rider that increases benefit limits in relation to inflation; you can even add additional benefits to gain assistance with tasks such as shopping, paying bills and certain housekeeping tasks.
Alternatives to Short-Term Care
If you’d rather create a pool of funds that are not exclusively for short-term care needs, you can take out a permanent life insurance policy. Permanent life insurance allows you to accumulate cash values, which can then grow based either on a fixed rate or the performance of underlying subaccounts. The cash values can be used for tax-free loans that can pay for whatever you need—including short-term care. Just remember that your death benefit may be reduced by any unpaid loans at the time of your death.
Since Medicare doesn’t step in and pay for assistance needed for nonmedical issues, it’s extremely important that you secure eithershort-term care, long-term care or cash value life insurance. With the protection of one of these policies, you can preserve your personal assets for the living expenses you and your spouse face throughout the duration of your retirement and, whenever possible, for the legacy you want to leave behind.