What would you do if you or your spouse were suddenly unable to work due to a disability? Would you have the means to continue paying your living expenses without that income?
How would you handle expenses if you or your spouse needed long-term medical care? Would you be able to afford the daily care needed, a cost that continues to rise?
These are uncomfortable scenarios to imagine, but failure to consider the possibility of such an occurrence could leave you bankrupt and desperate for help. For that reason, it is vital that everyone considers the need for both disability and long-term care insurance.
What is Disability Insurance?
In simplest terms, disability insurance is coverage that will pay a percentage of your salary in the event that you are unable to work because of a disability. However, options for coverage and costs of policies vary wildly and can be quite complex. Disability insurance can be costly depending on when you acquire the policy, even in group policies that typically offer reduced rates, but not as expensive as losing your home because of the inability to pay the mortgage.
What is Long-Term Care Insurance?
Long-term care insurance is a special type of health insurance that will pay for the cost of daily medical care should you require it on an extended basis. Most policies pay out a maximum amount per day until you’ve used up the funds in your personal pool. This pool is determined by multiplying the amount of daily coverage you want by the number of months you anticipate needing it. It is also quite complex with varying costs.
Aren’t There Government Programs for Both Situations?
Yes, there are government disability programs, but the monthly payout is quite low. You may only collect these benefits after you’ve been disabled for five months and the disability is expected to last longer than 12 months. Likewise, Medicare insurance for long-term care is limited, paying only a portion of the expenses for a maximum of 100 days.
Do I Need to Purchase Disability and Long-Term Care Insurance?
The Social Security Administration reports that the average 20-year-old has a 30 percent chance of becoming disabled for at least six months before reaching retirement age. That risk only increases as you grow older. Of course, varying occupational hazards can increase or decrease that risk depending on the industry, as can personal risk factors for disabling diseases.
The best method for determining if you need disability insurance is to take a disability risk assessment. This assessment will consider factors such as your age, occupation, and current health status to make a determination about how likely you are to become disabled before retirement.
After you know your risk level, you should analyze the impact your loss of income would have on your family. Remember that, if you are relying on a spouse to compensate for the loss, he or she will be responsible for a job, a household, and caring for you all at once. Can he or she carry such a large burden? Would you want him or her to?
With regard to long-term care insurance, this is a type of coverage most people purchase hoping to never need. It is crucial to have if the need arises, however. You should go through a similar process as that for determining the need for disability insurance when accessing the need for long-term care insurance.
Any individual who is not currently disabled or under long-term care is a good candidate for both forms of coverage. Remember, no one has zero risk, and very few can afford such a devastating situation without adequate insurance coverage.
To see if Disability and Long-Term Care Insurance should be a part of your portfolio, schedule an appointment with one of our professionals at The Marcus Group.