What if clients need a few months of help with the activities of daily living?

Let’s admit it: Long-term care insurance (LTCI) has been a popular item in America for about 20 years. Rightfully so. The need for LTCI is great and becoming ever more apparent.

But, unfortunately, while America’s emphasis has been on LTCI, a product exists that has been sadly overlooked: Short-term care insurance (STCI).

Now the secret is getting out.

Why has it been overlooked? The answer is quite simple. Very few agents know about STCI. And, second, if so few agents are aware the product exists, how can the public be expected to know about it?

Why has a product that can satisfy the needs of millions of Americans gone unknown, overlooked, and mostly ignored?

  • Many agents are not clear about the distinction between short-term care insurance and short-term health insurance—major medical health policies designed to cover people between jobs, in college, or waiting to find a new job.
  • Only seven companies that I know of offer the product. Pretty scarce pickins’ for a 100 million prospects.
  • Some state insurance departments (17) do not yet recognize STCI, because their efforts have been directed to long-term care insurance—tax-qualified policies, LTCI agent education and continuing education, and introducing (in most states now) the fairly new LTCI Partnership programs.

The states that have not yet recognized the existence of STCI may not understand how well the product would serve the needs of many of their people, if the people just knew what the product even exists. What a shame. That has to change

I don’t mean to create a discussion about LTCI and the turmoil currently surrounding the industry. If you have been involved in selling LTCI, you are aware that the problems in that market are no secret. That is unfortunate, and I wish it were not so. But, it is.

“We can’t afford LTCI!”
The most common phrase LTCI producers encounter is the “We just can’t afford it,” statement.

Whether or not the prospect can or can’t afford LTCI, or whether the prospect just chooses not to buy, is a genuine factor.

With that statement, neither the agent nor the prospect is satisfied. The agent goes without a sale, and the prospect goes without any coverage at all. Many times, the prospect is left feeling that the only alternative is to wait and try to qualify for Medicaid.

Possible sales don’t have to unravel that way.

We could ask, “What if there was kind of more affordable short-term care insurance?”

Well, there is. The product exists, and has for 20 years, but only a few of the 100 million people who could benefit from it are even aware of it.

Whose fault is that, and why has STCI been such a “secret”? It’s our fault.

State insurance departments that overlook and deny the existence and value of STCI; insurance companies that have the product and do not create a major marketing campaign to alert agents and clients alike as to the value of the product; insurance companies that have not yet recognized the need to include the product in their product portfolio; and agents who haven’t kept up with the times and aren’t aware of STCI.

In regard to the last admonition, it begs the question, “How could they be aware of STCI?” If the American insurance landscape has not made an honest effort to educate agents, how could they possibly be able to educate the public?

Well, then, let’s help clear the problem for you and your prospects.

Short-term care insurance, basically, is designed to cover nursing home costs, at any level of care, for less than a year. Some companies will include assisted living facility benefits in their policy, and some will offer home health care by rider.

LTC insurance, by definition, means care of one year or longer. STC insurance, by definition, means care of less than one year—normally 180, 270 or 360 days.

The names of STCI policies will come in several different flavors, but one of four words—recovery, rehabilitation, recuperation and convalescence—will likely appear in the name of the product.

That’s the basic premise of STCI, and what it is designed to do—pay for the cost of these kinds of care. Most people don’t know that their major medical, group health, or even Medicare plans are probably not going to cover these costs beyond a few days. So, that leaves STCI.

It is important to know that STCI products have nothing to do with Medicare. Some companies offer the product to an age bracket as low as age 18, and up to age 84. Others target the market from ages 50 to 80.

So, what does STCI cover?

First of all, remember that the STCI policy has nothing to do with Medicare-related status, except that it will pay in the cases where Medicare denies the enrollee the “extended care” benefits of Medicare (which happens to over a million people a year). Benefits are available to under age 65 policyholders as well as those over 65.

There are three triggers—”triple triggers”—so to speak. Coverage will include illnesses and injuries, cognitive needs, and a term which was dropped from LTCI when tax-qualified policies were introduced—that of “medical necessity.” Medical necessity is included as a trigger in most STCI product offerings.

The STCI product is designed to cover the same conditions as LTCI products do, with the addition of “medical necessity”

  • The need for help with two activities of daily living (ADLs) in a nursing home. Some policies will also cover the needs in an assisted living facility, and may offer home health care by rider.
  • Cognitive needs—Alzheimer’s, Parkinson’s, etc.
  • Medical necessity, as a third trigger, is included if the insured requires medically necessary care as determined by a physician due to a covered injury or covered sickness.

What are examples of covered injury or illness, or medical necessity?

They are quite common, in fact: The most common of serious illnesses in America.

For instance, Americans have 1.1 million hearth attacks per year, but most people survive and are able to return to work. Perhaps, however, only after a lengthy period of recovery, convalescence, or rehabilitation—which could require months. Most major medical or group health policies are not designed to pay recovery care costs. Buying STCI is a natural way to meet these needs.

Stroke victims are probably the most common example of people who need STCI. The truth is, stroke victims are particularly affected by lengthy recuperative and rehabilitation needs. Even though stroke victims are surviving at a greater rate, the rate of incidence is up—particularly in the 40-plus age bracket.

Cancer numbers are scary, as we all know, with the incidence of cancer diagnoses up, and death rates down. But, the disease is often accompanied by a long need for recovery, and that is where the role of STCI becomes important.

Hip and knee replacements are becoming quite common—for patients over and under age 65. But, complications or recovery periods are also a factor in many cases.

One important question: Should STCI be considered a substitute for LTCI?

Absolutely not! They are two different products, with each designed to serve a particular need. An agent who would imply that STCI is a better solution than LTCI is simply derelict. It may be a more affordable solution for people who can’t afford or qualify for LTCI, but in no way should it be considered a substitute.

Obviously, we haven’t covered all the particulars of STCI, but these are answers to the basic questions producers have, just to enable them to become familiar with the product.

So, now the “secret” is out. What will you do to spread the word?

See also: