Thursday, May 03, 2012

Introducing STCi

No, that's not a typo: we've written quite extensively on Long Term Care insurance (LTCi), but this is new to us.

The major challenge with LTCi is the premium. While these plans can be cost-effective, there's no question that they can be, as my sister says, spendy. So, a lot of folks decide that, if they can't afford the plan they want they'll just take a pass altogether. While that's certainly understandable, it can be a big mistake.

But how to resolve the dilemna?

Well, that's where Short Term Care insurance (STCi) comes in:

"Short-term care (also known as Recovery Care or “LTC Lite”) is not a new product but it has been gaining ground in the last 2 years ... With its shorter underwriting cycle, high-issue rates, and low premiums it’s becoming increasing popular"

Unlike traditional or Partnership plans, these policies typically have benefits that last for a year (or even less). On the other hand, unlike the typical 90-day waiting period common to LTCi, these plans boast elimination periods of less than 60 days. So they pay out quicker (albeit for far shorter periods). In fact, they could be used to fill that "gap" in traditional plans.

Underwriting on these plans is claimed to be much quicker than LTCi (although I have no direct knowledge of this. YMMV).

The target market for these plans seems to be those who have already hit "senior" stage (age 65+) and have less than $100,000 in savings and investments. This is a somewhat different makeup from the typical LTCi policyholder.

Is this a panacea? Of course not, but it is a potentially helpful alternative to folks who've considered - and rejected - traditional Long Term Care plans.
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