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Disability Insurance vs. Long-Term Care Insurance
September 2009
It’s easy to get confused when a financial advisor
starts talking about insurance options. This is especially true when explaining
the differences between long-term care insurance and disability insurance.
First, both of these options help pay expenses when a policy holder becomes too
ill to work or care for him/herself. Also, both are often associated with
seniors. Also, both can be “guaranteed renewable,” meaning that the insurance
company can’t cancel the policy.
However, there are some important distinctions that are
important for you to recognize.
Disability Insurance. Disability insurance
protects future earnings. Basically, it replaces income when you become
physically unable to work. Without it, most people are not prepared for the loss
of wages that usually follows a severe injury or illness. It’s important to know
that most disability policies recover only a percentage of a person’s lost wages
– typically 60% to 80%. In addition, the payout amounts decrease when the
person’s disability goes from short-term to long-term.
Long-Term Care Insurance. Long-term care policies
cover the cost of disabilities due to age, illness or injury. This can include
paying for care at your residence or in a nursing home. It will pay for room,
board and skilled care by health care professionals. Like disability coverage,
long-term care policies can be purchased only when you are healthy. They can
also vary in eligibility criteria – namely, the determination of when someone
can no longer live independently. Policies vary in length of coverage, from a
few years to the rest of your life. The typical nursing home stay lasts about
three years; therefore, one way to afford long-term care is to purchase only a
few years worth of coverage.
Adapted from the Daily Plan-It newsletter. Hoopes,
Adams & Alexander, PLC, is a Chandler, Arizona, law firm offering services to
Phoenix-area clients in the areas of estate planning, entity formation,
commercial and real estate transactions, and civil litigation. |
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