There are a number of different insurance options that can assist you and your family if you become impaired or disabled. Two of the most popular options are long-term disability and long-term care. Both of these are designed to protect your assets and interests in distinctive ways, so knowing the differences between the two is key in determining how each one can be beneficial to meet your needs.
What is Long Term Disability Insurance?
Long-term disability insurance provides a monthly income in the event you become disabled as a result of a covered accident or illness. Long-term disability insurance kicks in when you can no longer work. Most policies will pay up to 60% of your salary. Many policies apply to any occupation, meaning that it will only pay out benefits if you are not able to perform any job. Other policies may fall into the “own-occupation” category, which allows you to receive benefits if you are unable to perform the duties of your specific occupation. Most professionals will want to seek out an “own occupation” policy. These policies are also available with guaranteed renewable and non-cancelable provisions.
Benefits are paid out via a monthly stipend after a certain waiting period, which varies by policy. This type of policy can be used in conjunction with Social Security payments received for disability. This benefit continues on a monthly basis until the policy is exhausted or you are able to return to work.
When considering long-term disability, know that there are certain pre-existing conditions that could affect you from getting a policy of this nature. Additionally, the number of years you have left before you retire is important to take into consideration. If you do not have many years left to work, long term disability may not be worth the cost; however, if you have at least 5-10 years left before retirement, or you are the only source of income for your family, then disability insurance is of utmost importance.
What is Long Term Care Insurance?
Long-term care insurance is not based on loss of work or inability to perform a previous job due to disability, but instead, pays out benefits based on your inability to perform at least two of six daily living functions. Activities of daily living (ADLs) may include bathing, dressing, toileting, transferring, continence and eating. It is a daily cash benefit that will cover the costs of health care services that can be administered in a nursing home, assisted living facility, in-home care, or adult daycare. Benefits can be received at any age as long as you are unable to perform at least two ADLs.
Purchasing long-term care insurance is a more extensive process and is very specific to each individual situation. It takes an experienced long-term care insurance specialist to match you with the right options, carriers, and companies. There are certain pre-existing conditions in these policies that could disqualify you from getting coverage so it is important to speak with a professional to learn the details. Medicaid does provide long-term care, but only applies after your other assets have been depleted.
Which is right for me?
Both policies should be considered while in good health and at a younger age. Although they are an extra expense to your insurance budget, both provide valuable coverage in your time of need and protect the assets you’ve worked hard to save. If having to choose one or the other, you’ll want to ensure that you have long-term disability insurance during your working years and long-term care insurance becomes more important as you get closer to retirement.
Long Term Disability Insurance: If you are the main income source for your family and the prospect of losing just a few months’ income just isn’t an option, then you should consider purchasing a long-term disability policy. Age is also an important factor. For example, imagine if you became permanently disabled at 30 years old — if you plan to retire at 65, that is 35 years of lost income.
Long Term Care Insurance: Age is a big factor when it comes to purchasing long-term care insurance. This is something you should look at when you are in your 50s. It is better to purchase it early so you can save money on premiums and have a better chance of being approved. Other factors to consider are your family history, as well as your personal health history.
The FICPA sponsored CPA Insurance Marketplace can provide more information to help you make an educated decision that will give you the best coverage available for your individual circumstance. Contact us at (800) 282-8626 to have your questions answered or to request a quote for long-term disability insurance today.