What is the difference between disability insurance and long term care insurance? Amy Long

What is the difference between disability insurance and long term care insurance? Quite often people do not understand the differences between disability insurance and long term care insurance. As with many insurance products, the average consumer tends to confuse the two. Disability insurance is meant to protect future earnings due to a disabling event. Disability insurance covers a percentage of your lost wages if you are unable to work due to an illness or injury. Without disability insurance many people would not be prepared for the loss of wages that accompanies such incidents. The typical disability insurance policy usually covers about 60 percent of one’s lost wages. A disability policy will pay the insured if a doctor declares that you are not physically or mentally able to return to work due to an accident or an illness. A standard short term disability policy will pay loss of wages for a period of no more than 6 months. Long term disability policies usually pick up where short term disability policies leave off. Some long term disability policies pay for 5 or 10 years while many cover for lost wages to age 65. Policies can be 'guaranteed renewable' and 'non-cancelable.' Guaranteed renewable means the insurance company cannot drop the policy, unless premium payments are skipped. Non-cancelable means the insurance company can never raise the premium on the policy. Both are desirable, but non-cancelable is usually best.

Long Term Care insurance is intended to help cover expenses that are incurred when one enters a nursing home, an assisted living facility or is receiving care at home. Without long term care insurance, an individual could end up having to exhaust all of their assets in order to pay for their care. As with disability policies, certain criteria must be met in order for the long term care policy to pay out benefits. When a medical doctor declares that an individual needs help with certain activities of daily living or if there is any kind of cognitive impairment that persists, the long term care policy will pay. There is usually a waiting period that long term care policy holders must satisfy before benefits pay. Waiting periods can last anywhere from 30, 60, 90 or even 180 days. The length of the waiting period is depending on which policy the individual has bought into when they initially purchase the long term care policy. The longer the waiting period is the lower the premium. The policy holder is responsible for all expenses during this waiting period. Medicare may cover a percentage of these first 100 days of care if it is preceded by a three day hospital stay. The waiting period is simply another term used for the insured’s deductible. Long Term care policies pay a pre-determined daily benefit such as $150 for a set benefit period. Benefit periods range anywhere from 2 years to lifetime. The longer the benefit period is the higher the premium. If a policy consists of a $150 daily benefit and a 5 year benefit period then the individual would have $150 per day to pay for the cost of their care for a period not exceeding 4 years. Most claims are usually satisfied with a 5 year policy. Long term care insurance is important for people in their 50s and 60s to seriously consider. Like long term disability policies, long term care policies can be "guaranteed renewable", meaning the insurance company can not drop the policy. Most experts recommend a policy that is guaranteed renewable.

What is the difference between disability insurance and long term care insurance? Disability insurance is meant to protect future earnings due to a disabling event and long term care insurance is intended to help cover expenses that are incurred when one enters a nursing home, an assisted living facility or is receiving care at home. Contact a LTCi professional to determine what plan works best for you.