Know your vegetables
One way to explain the differences between disability insurance and long-term care policies is by asking clients to think of themselves as farmers and the different insurance policies as different vegetables. Because it is meant to replace or supplement lost income, DISABILITY insurance is similar to the potato — something farmers will plant early in the season to act as filler for stews and casseroles for when times are lean. LONG-TERM CARE policies will help later in life and can be considered the squash — a staple food that a farmer will plant for a late harvest.
Replacing lost income
Disability insurance, like life insurance, protects future earnings. Basically, it replaces income when you become physically unable to work. While health insurance covers the costs associated with severe injuries or illness, without disability insurance, most people are not prepared for the loss of wages that usually follows. It’s important to know most disability policies only recover a percentage of a person’s lost wages — typically between 60 to 80 percent. In addition, the payouts decrease in amount when the person’s disability goes from short-term to long-term.
Paying for nursing care
Long-term care policies cover the cost of disabilities due to age, illness or injury. This can include paying for care at the client’s 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 generally can only be purchased when a person is healthy. They also vary in eligibility criteria, including the determination of when someone can no longer live independently. Policies vary in length of coverage, from a few years to “lifetime.” The typical nursing home stay lasts about three years; therefore many clients may only wish to purchase a few years worth of coverage.