CFP

Insurance Needs Approach - Disability and Long-Term Care Insurance

DISABILITY INCOME INSURANCE
The need for disability insurance is vital in the event of a disabling illness or accident. Statistics have shown that the probability of disability is higher than that of death during an individual's working years. Protection is not only obtained in the event of financial loss through life insurance, but also in the case a wage earner becomes disabled, is this type of insurance valuable. The cost of disability insurance differs and depends on age, sex of the insured, extent of coverage, length of benefits, and length of elimination period (waiting period).

In the event a wage earner becomes disabled and his/her family is faced with this economic death, results can be detrimental. There are two types of disability insurance:
1. Short term: A short term disability payment will send you a weekly check for up to two years.
2. Long term: A long term policy will pay you for two years, five years, up to ages 65 or 67, or for the rest of your life.

Definition
The inability of the insured to engage in his/her own occupation. The next definition makes it harder to claim benefits. The insured is unable to engage in any occupation for which he/she is qualified by reason of training, education, or experience.

LONG-TERM CARE INSURANCE

Definition

Long term care is defined as a person requiring someone to help with physical or emotional needs over an extended period of time. The need for long-term care help might be due to a terminal condition, disability, illness, injury or the infirmity of old age. The need for long-term care may only last for a few weeks or months or it may go on for years. It all depends on the underlying reasons for needing care. This is the risk that long term care insurance is designed to protect. Bills for this type of care can eat away at a lifetime savings awfully fast.

Because the premiums for a full coverage long-term care policy can be rather expensive, many individuals overlook the need for some type of long-term care insurance coverage. Typically, in the early ages of the 50's, individuals should start to think about how they would like to be cared for in the event that they could not take care of themselves. Perhaps a spouse or the children will care for them, or maybe the individual does not want to burden anyone with the task of assisting them.

In any case, as awkward as it may be to discuss, it must be addressed. In married couples, it is typical that the healthy spouse will take care of the other spouse needing care. But suppose the husband passes away, who is going to take care of the surviving spouse in the event she needs some type of nursing care? This is one example of where long-term care insurance should be addressed. Since annual stays in a nursing facility can cost as much as $70,000 per year, individuals must determine if they have enough savings to self-insure this risk or if they desire an insurance policy to transfer that risk.



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