Insurance policies are purchased to protect you from the risks in life, but different types of insurance cover different risks.
Long term care insurance and long term disability insurance are two types of insurance that are commonly mistaken for each other, even though their coverages are very different. Both types are used to protect you in the event of a health issue, but the difference comes in the situations in which you use their benefits.
What is the difference between the two types of insurance?
Long term care benefits are triggered when an individual loses the ability to perform two of the six activities of daily living, such as bathing or dressing themselves. Long term care benefits can be utilized at any point in a person’s life, but are generally used later in life. Limits on benefit duration or amount vary from policy to policy.
Disability insurance benefits are triggered when an individual is unable to work due to an illness or injury. These benefits are used at any point while a person is of working age, and end usually by age 65.
Long term care insurance provides a daily or monthly benefit amount to be used to pay for care, such as an assisted living facility, hospice care, or home nurse.
Disability insurance provides a monthly income of up to around 60% of your regular income. This benefit is used while you can’t work to pay for your living expenses.
A major purpose of long term care insurance is to protect your savings. Care is a costly monthly expense that can drain your assets and your retirement savings quickly. It also places strain on your family members to either financially provide for your needs, or to act as caregivers. Long term care insurance provides peace of mind that you will have control over the care you receive, if you ever come to need it.
Disability insurance also protects your savings, but in a different situation. One in four of today’s 20-year-olds will be out of work for at least a year because of a disabling condition before they reach the normal retirement age*. Disability insurance provides you income during that time so you can pay for your expenses and your family can retain their lifestyle.
Which one do I need?
Both types of insurance protect your assets when you’re in a time of need, but they cover different types of needs and the benefits are used at different stages in your life.
Age plays a large role in the premium amount you will pay for these policies, so it’s better to get these policies as early as you can in life. A financial advisor can help you decide if you are in need of one type of policy over the other, or if you would benefit from coverage of both.
If you have any questions about disability or long term care insurance, don’t hesitate to contact us. We’re happy to talk through the types of polices available, review your existing coverage, or help you find a policy that is right for you.