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MoneyWatch: Managing Your Money
By Aly Yale
Edited By Angelica Leicht
/ CBS News
The high cost of long-term care, whether it's nursing home or caretaker services, can be financially devastating for seniors. Depending on the level of help you need, it could mean paying anywhere from $2,000 to $10,000 per month or more — or about $24,000 to $120,000 per year, according to data from Genworth.
While Medicare won't cover the majority of these costs, some insurance plans — called long-term care insurance or short-term care insurance — will. That said, these two options differ in terms ofcost, coverage, eligibility requirements and other important factors, so it's important to understand how each type of policy works before deciding which one is best for you.
Interested in what long-term care insurance can offer you? Compare your policy options now.
Short-term vs. long-term care insurance: Which option is right for you?
Here's what to know about long-term and short-term care insurance — and which may be right for your situation.
The length of care matters
As the names suggest, short-term care insurance provides coverage for a shorter period of time — typically up to one or two years on average. Long-term care insurance, on the other hand, can be used for much longer periods.
"It's designed for extended care needs," says Susana Zinn, an independent life insurance agent in Miami, Florida. "It covers services for several years or even for life."
For example, if you and your spouse or partner both need nursing home or caretaker services, or expect to need them in the future, long-term care coverage could be the better choice.
"Long-term care insurance can offer richer benefits that last longer and have more options for couples doing this together," says Mark Baron, owner of Baron Long-term Care Planning.
Find out what your long-term care insurance options are and get coverage today.
One may be easier to qualify for than the other
If you have existing medical conditions or are worried about qualifying for insurance, a short-term policy is usually best, experts say.
"Short-term policies typically require a simple health survey with yes/no questions, making it relatively easy to qualify," says Matthew Cleary, a financial planner at Sentinel Benefits & Financial Group. "Long-term care policies involve a more rigorous underwriting process."
This might include detailed applications, a thorough review of your medical records and stricter qualification criteria, Cleary says.
"Neither type of plan will consider someone already receiving care in a nursing home or who has a diagnosis of Alzheimer's, but short-term care is very flexible in many cases," Baron says.
There's a significant cost difference
Short-term care policies are priced based on a daily rate, and according to Zinn, you can typically expect to pay between $50 to $200 per month, depending on the policy and your age/health. Long-term care policies, on the other hand, cost between $100 to $500 per month, she says.
Because of these discrepancies, short-term policies may be best if you're on a tight budget.
"For those unable to afford a long-term care policy, short-term insurance can provide a smaller amount of coverage to lessen the burden of a medical event," Cleary says.
If you continue to need care beyond the short-term policy's limits, you can take out a new short-term policy. That can be a smart fix to consider if long-term policy costs are still out of reach.
"You can piggyback a couple of short t-rm care plans and have one take over when the first one is exhausted," Baron says.
You may not have short-term care options in your area
While long-term care insurance policies are available widely, short-term options aren't as common.
"A major problem with short-term care insurance is that there are significant regions of the country where short-term care insurance is not available," Baron says. "Most of the northeast doesn't offer it because the state insurance divisions have never approved these products for sale."
If you're unsure as to whether short-term policies are an option in your area, talk to a local licensed insurance agent. They can help you compare the policies and premiums that are available to you.
Combining the two might be an option
In some cases, you may want to combine both short- and long-term policies, according to Cleary.
For example, with long-term policies, there is often a waiting period of 60 to 90 days before your benefits kick in. In this case, you may want a short-term policy to cover the gap.
"A short-term insurance policy can activate and cover costs during that interim," Cleary says.
The bottom line
Both short- and long-term care insurance policies can be viable options to consider depending on your unique circ*mstances, needs and other factors. As with any financial product, though, it's important to shop around for your insurance policies — whether it's long-term or short-term coverage. During this process, be sure to get quotes from several providers and compare your coverage options and premiums.
