Short-Term Care Insurance

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on July 03, 2023

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What Is Short-Term Care Insurance?

Short-term care insurance is a type of insurance policy that provides coverage for temporary care services. These services are usually required due to illness, injury, or age-related issues, but are expected to last for a limited period.

Short-term care insurance policies are designed to help individuals and their families pay for necessary care without depleting their savings or relying on government assistance.

They are particularly useful for those who may not qualify for long-term care insurance or who need coverage for shorter periods of time.

Short-term care insurance can be a valuable financial tool for those facing temporary care needs.

It can help bridge the gap between medical insurance and long-term care insurance, providing coverage for care services that may not be covered by other insurance policies.

Additionally, short-term care insurance can offer peace of mind to individuals and their families, knowing that they have a plan in place to cover the costs of care when needed.

This can help alleviate stress and ensure that individuals receive the care they need to recover or maintain their health.

Types of Short-Term Care Insurance

There are several types of short-term care insurance policies available, each with its own unique features and benefits. Understanding the differences between these policies can help individuals make informed decisions about which policy is best for their needs.

Indemnity Policies

Indemnity policies pay a fixed daily amount for each day that covered services are received, regardless of the actual cost of care. This provides policyholders with flexibility in how they use their benefits, as they can apply the funds toward any care-related expenses.

However, it's important to note that indemnity policies may not cover the full cost of care, particularly if the cost of care exceeds the daily benefit amount. This can result in out-of-pocket expenses for the policyholder or their family.

Expense-Incurred Policies

Expense-incurred policies reimburse policyholders for the actual cost of covered care services, up to a specified daily or monthly limit. This type of policy provides more comprehensive coverage, as it directly covers the costs of care.

However, expense-incurred policies may be more expensive than indemnity policies, and policyholders may need to submit documentation to their insurance company to receive reimbursement.

Additionally, benefits may only be paid for services provided by approved providers, which can limit the policyholder's choice of care providers.

Types of Short-Term Care Insurance

Coverage and Benefits of Short-Term Care Insurance

Short-term care insurance policies can provide coverage for a variety of care services, depending on the specific policy chosen.

Understanding the coverage and benefits offered by different policies can help individuals make informed decisions about which policy is best for their needs.

Services Covered

Short-term care insurance policies typically cover a range of services, including home health care, assisted living, adult day care, respite care, and rehabilitation services.

These services can be essential in helping individuals recover from illness or injury or manage age-related issues.

It's important to carefully review the specific services covered by a policy, as well as any exclusions or limitations, to ensure that the policy meets the individual's needs.

Some policies may also offer optional riders or endorsements to expand coverage to additional services or increase benefit limits.

Benefit Periods

Short-term care insurance policies have defined benefit periods, which determine the length of time for which benefits will be paid. Benefit periods can range from a few months to several years, depending on the specific policy chosen.

When selecting a policy, it's important to consider the individual's anticipated care needs and choose a benefit period that provides adequate coverage.

Additionally, some policies may have a maximum lifetime benefit limit, which caps the total amount of benefits that can be paid over the life of the policy.

It's essential to understand these limits and ensure that the policy provides sufficient coverage for the individual's needs.

Daily and Lifetime Benefit Limits

Short-term care insurance policies typically have daily benefit limits, which determine the maximum amount that will be paid for covered services each day. These limits can vary widely between policies and should be carefully considered when selecting a policy.

Lifetime benefit limits are also a crucial factor in choosing a short-term care insurance policy. These limits determine the total amount that the policy will pay over its lifetime.

It's important to choose a policy with adequate lifetime benefit limits to ensure sufficient coverage for the individual's care needs.

Elimination Periods

An elimination period is a waiting period during which the policyholder must pay for care services out-of-pocket before the insurance benefits begin.

Elimination periods can range from a few days to several months and may vary based on the specific policy and type of care service.

When choosing a short-term care insurance policy, it's important to consider the elimination period and how it may impact the individual's financial situation.

Longer elimination periods can result in lower premiums but may increase the policyholder's out-of-pocket expenses during the waiting period.

Eligibility and Underwriting of Short-Term Care Insurance

Understanding the eligibility requirements and underwriting process for short-term care insurance can help individuals determine whether they qualify for coverage and what factors may impact their premiums.

Age Requirements

Age is a significant factor in determining eligibility for short-term care insurance. Most insurance companies have minimum and maximum age requirements for applicants, which can vary between companies and policies.

In general, younger applicants may have an easier time qualifying for coverage and may receive lower premiums. Older applicants may face higher premiums or have difficulty obtaining coverage due to age-related health concerns.

Health Requirements

The underwriting process for short-term care insurance typically involves a review of the applicant's health history and current health status.

Insurance companies may require medical records, a health questionnaire, or even a medical exam to assess the applicant's health.

Applicants with pre-existing conditions or significant health concerns may have difficulty obtaining coverage or may face higher premiums.

It's essential to be honest about one's health history during the application process, as misrepresentations can result in policy cancellation or denial of benefits.

Cost of Short-Term Care Insurance

The cost of short-term care insurance can vary widely based on several factors, including the applicant's age, health, benefit period, and coverage.

Understanding these factors can help individuals make informed decisions about which policy is best for their needs and budget.

Factors Affecting Premiums

The main factors that affect short-term care insurance premiums are the applicant's age, health, benefit period, and coverage. Younger, healthier applicants generally pay lower premiums, while older applicants or those with health concerns may pay higher premiums.

Additionally, policies with longer benefit periods or higher daily and lifetime benefit limits may have higher premiums. It's important to consider these factors and weigh the benefits of additional coverage against the increased cost.

Premium Payment Options

Short-term care insurance policies typically offer a variety of premium payment options, including annual, semi-annual, quarterly, or monthly payments.

Some policies may also offer a single premium payment option, where the policyholder pays the entire premium upfront.

Choosing a payment option that fits the individual's financial situation can help ensure that the policy remains affordable and in force. It's important to remember that premiums may increase over time due to factors such as inflation or changes in the policyholder's health.

Tax Implications of Short-Term Care Insurance

The tax implications of short-term care insurance can be an important consideration for policyholders. Premiums for short-term care insurance may be tax-deductible, depending on the individual's age and the policy's status as a qualified plan under IRS guidelines.

Additionally, benefits received from short-term care insurance policies are generally not considered taxable income, as long as they are used to pay for qualified care expenses.

It's important to consult with a tax professional to understand the specific tax implications of purchasing and receiving benefits from a short-term care insurance policy.

Choosing a Short-Term Care Insurance Policy

Selecting the right short-term care insurance policy involves evaluating insurance companies, comparing policies and coverage, and consulting with a professional to ensure that the chosen policy meets the individual's needs and budget.

Evaluate Insurance Companies

When choosing a short-term care insurance policy, it's essential to evaluate the financial strength and reputation of the insurance company.

This can help ensure that the company will be able to pay claims and provide the necessary support when care services are needed.

Policyholders should look for insurance companies with strong financial ratings from independent rating agencies, such as A.M. Best or Standard & Poor's.

Additionally, it can be helpful to review customer reviews and complaints to assess the company's customer service and claims handling processes.

Compare Policies and Coverage

Comparing the coverage, benefits, and costs of different short-term care insurance policies can help individuals make informed decisions about which policy is best for their needs.

Factors to consider include the types of services covered, benefit periods, daily and lifetime benefit limits, elimination periods, and premium costs.

It's important to review the specific terms and conditions of each policy, including any exclusions or limitations, to ensure that the chosen policy provides the necessary coverage and benefits.

Consult With a Professional

Consulting with an insurance agent, financial planner, or other professional can be invaluable in helping individuals navigate the process of choosing a short-term care insurance policy.

These professionals can provide guidance on the various policy options, help evaluate insurance companies, and offer personalized advice based on the individual's unique needs and financial situation.

How to Choose a Choosing a Short-Term Care Insurance Policy

Alternatives to Short-Term Care Insurance

While short-term care insurance can be an important tool in planning for future care needs, there are other options available for those who may not qualify for coverage or prefer a different approach.

Long-Term Care Insurance

Long-term care insurance provides coverage for a broader range of care services and for longer periods than short-term care insurance.

This type of insurance may be more appropriate for individuals who anticipate needing care for an extended period or who wish to protect their assets from the potentially high costs of long-term care.

Life Insurance with Long-Term Care Benefits

Some life insurance policies offer riders or provisions that provide long-term care benefits in addition to the traditional death benefit. These policies can help individuals cover the costs of care while also providing financial protection for their beneficiaries.

Medicare and Medicaid

Government programs such as Medicare and Medicaid may provide coverage for some care services, particularly for individuals with low income or limited assets.

However, these programs often have strict eligibility requirements and may not cover the full range of care services that an individual may need.

Personal Savings and Investments

Individuals can also choose to self-fund their care needs through personal savings and investments. This approach requires careful planning and disciplined saving but can offer greater flexibility and control over care choices.


Planning for short-term care needs is an important aspect of financial and healthcare planning. Short-term care insurance can provide valuable coverage and peace of mind for individuals and their families.

By understanding the various policy options, coverage and benefits, and eligibility requirements, individuals can make informed decisions about whether short-term care insurance is the right choice for their needs.

It is crucial to periodically review and reassess one's short-term care insurance needs as personal circumstances, health status, and financial situations may change over time.

Regularly reviewing the chosen policy and considering any changes in care needs or financial resources can help ensure that the policy continues to provide adequate coverage and protection.

Furthermore, engaging in ongoing conversations with family members, healthcare providers, and financial professionals can help individuals stay informed about their care needs and options.

Open communication and shared decision-making can lead to more effective planning and better outcomes for both the individual and their loved ones.

Ultimately, planning for short-term care needs is an essential part of ensuring financial security and peace of mind for the future.

By carefully considering the various factors involved in short-term care insurance and exploring all available options, individuals can take control of their healthcare planning and make informed decisions that support their overall well-being and quality of life.

Short-Term Care Insurance FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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