Disability Insurance vs. Long Term Care Insurance: Which is Best for You?

NOVEMBER 16, 2016
Bob Bhayani, MBA

It’s easy to confuse long-term disability insurance with long-term care insurance. Nonetheless, these two insurance plans serve very different purposes in helping you manage financial risks.
 
Long-term Disability Insurance
 
Long-term disability insurance policies aim to protect employees from a loss of income if they were unable to work due to illness, injury, or accident for “long-term.” Long-term disability insurance provides policyholders with a pre-determined percentage of their income depending on the specifics of the policy.
 
How important is it to protect your income? Approximately 90% of wage earners rated their ability to earn an income as “valuable” or “very valuable” in helping them achieve long-term financial security. These wage earners further believe their ability to earn an income is more valuable than retirement savings, medical insurance, personal possessions, or their homes.
 
Many people have health insurance that will pay for surgery, accidents, or heart attack care, but how many people consider insuring themselves against the lost wages that go along with these unfortunate health incidents?
 
Long-term Care Insurance
 
Long-term care can be defined as hands-on assistance for those who can’t take care of themselves for an extended period of time due to prolonged disability illness or cognitive impairment. A person qualifies for long-term care when he cannot independently perform at least two activities of daily living, such as grooming and eating.
 
Long-term care insurance policies provide a daily amount (determined by one’s policy) to policyholders for services to assist them with activities of daily living.
 
So which Policy is best for you?
 
Here are some considerations when deciding which policy to choose:
 
Long-term disability insurance is vital if you are the main income source of your family. You have to ask yourself if you and your family could afford the necessities of life if your income temporarily or permanently lost.
 
Age is also a very important variable: Imagine if you became permanently disable at 30. You would be out of 35 years of income (if you planned on retiring at 65).
 
Age is a huge factor for another reason when you are considering the purchase of long-term care insurance. Make sure you start to look into policies while you are still young. If you purchase when you are young, you can save on premiums, and more likely get approved.
 
Bottom Line
·      Consider purchasing both policies when you’re healthy and young.
·      Both provide important coverage in a time of need.
·      Both protect your assets.
 
If you must choose one over the other, here’s a quick rule of thumb. During your working years insure your income with long-term disability insurance. Long-term care insurance becomes more important as you move towards retirement.
 
But nothing beats the protection that comes with both types of insurance
 
Source: Council for Disability Awareness
 
Bob Bhayani MBA is a managing partner at www.drdisabilityquotes.com.


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