Are You Covered? Why Individual Disability Income & Long-Term Care Insurance are Important

John HeacockAugust 23, 2019


Generating Income and asset protection are two important components of building and maintaining a rock solid retirement strategy.  Planning for a potential disability and/or long-term care event in the future is critical to a successful financial plan, ensuring protection of income and assets for family members in the long term.

An unexpected injury or chronic illness can have a significant financial impact on individuals and families, as well as business owners.  The inability to wake up every day and go to work can cause a tremendous strain in meeting financial obligations or maintaining lifestyles, greatly reducing savings and derailing funds for retirement.  Post-retirement, the impact of a long-term disability or chronic illness can be dramatic and significantly alter the lives of family members and those caring for the person with a disability. In summary, owning disability income and long-term care insurance help lessen the impact of these life-altering events.

Individual Disability Income (DI) Insurance

Are you covered?  Statistics show that over 50 million working American adults are facing a growing crisis: a lack of adequate disability insurance coverage.  Upwards of 375,000 Americans become totally disabled every year and a 35-year-old individual has a 50% chance of becoming disabled for 90 days or more before reaching age 65.

With that in mind, disability income insurance provides income replacement, protecting future earnings.  A disability can occur at any time; the probability increases with age.  A disabling event often coincides with peak earning years, a time when individuals are focused on saving for retirement.  Social Security programs provide modest benefits and can be extremely difficult to obtain.  In fact, about 35% of the individuals that apply for benefits actually qualify and ultimately receive those remunerations.  On average the Social Security Disability Insurance (SSDI) program pays $722 per month.

Many people who rely on their occupation salary to cover their living expenses choose to protect their future earnings with disability income insurance.  Coverage can be obtained individually or employers can provide or sponsor programs that provide individual policies in addition to existing group long-term disability benefits.  Employer-sponsored individual disability programs allow an executive to obtain more coverage with limited underwriting and at discounted premiums.

Long-Term Care (LTC) Insurance

Are you covered?  Most people have never even considered buying long-term care insurance.  But it’s important to face the facts.  According to the U.S. Department of Health and Human Services, a person turning 65 today has almost a 70% chance of needing long-term care services at some point in his or her lifetime.

As mentioned in a previous blog, Long-Term Care (LTC) Insurance provides income for the cost of care, which helps protect accumulated wealth.  LTC encompasses a wide range of supportive and health services that are required when an individual suffers from a long-term disability, chronic illness, or if an accident renders them physically or cognitively unable to care for themselves for an extended period.

Medical insurance covers hospitalization, but not assistance with activities of daily living, such as getting dressed, eating, or bathing.  Other social programs require assets to be exhausted before providing assistance, or they may only provide nursing home care for a limited period after a hospitalization — not care at home where most prefer to convalesce.  Assistance for services to help with activities of daily living can be very costly.

Many people choose to protect themselves against this risk by purchasing long-term care insurance to provide a dedicated stream of income in the event care is needed.  This allows the individual to maintain their independence and have family members supervise care, rather than provide it themselves or make decisions on how to pay for needed attention.

3 Long-Term Care Facts that Are Noteworthy:

  1. Sixty-nine % of us Need Long-term Care Insurance: A key fact to know about long-term care is that there’s a good chance you’ll need it.  Of those turning 65 this year, 69% will need some kind of long-term care in the future.
  2. One to Three Years is How Long You’ll Likely Need It: Another important issue to understand is that when we need long-term care, the period of time we need it for is typically about one to three years — which might be a much shorter period than you assumed.
  3. The percentage of expenditure of $250,000 or More is 15.2 %: According to a 2016 report from the National Association of Insurance Commissioners (NAIC), 15.2% of people who turn (or turned) 65 between 2015 and 2019 will spend more than $250,000 on long-term care during their lives.

Effective Disability Income & Long-Term Care Strategies:

Given all of the information presented, what should you do? We encourage you to definitely spend some time thinking about whether you would be well served by owning individual disability income and long-term care insurance, and then decide if and when you want to buy such coverage.  If you have any questions and/or would like assistance in shopping around for the best rates and the best coverage, please let us know how we can help!



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