YOU ASK:

What are the pros and cons of disability insurance versus long term health care insurance?

WE ANSWER:

Disability insurance pays when the insured is stricken with a covered disability. The benefits are usually paid monthly and are computed as a percentage of one's salary just prior to the disability. The benefits are spent at the insured's discretion. He can spend it paying for his bills, his mortgage, his long term care or just about anything else.

Meanwhile, long term health care insurance, which may also pay monthly, is earmarked specifically towards paying for the insured's long term care expenses.

Let us take a look at the pros and cons of both insurance products.

Disability Insurance

Pros:

  • This is generally cheaper than long term care.
  • You can have both private disability insurance and disability insurance from Social Security and other sources.
  • The policy will pay as soon as you are able to prove you have a covered disability. There will only be a short elimination period and then the insurance will start making the payments.
  • The policy will pay when you get disabled, regardless of whether the disablement occurred at work or outside of it.

Cons:

  • Disability insurance is only provided to those who are earning an income (either as a salaried employee or a self-employed individual). It makes no sense to have this coverage for people who don't earn an income.
  • The claims will only be paid if you are unable to continue with your occupation (in "own occupation" types of policy) or when you can't do the tasks involved in work of any kind ("any occupation" types of policy.
  • The insurance will only pay for a portion of your salary.
  • Any proceeds from Social Security disability benefits will be computed and deducted from what you stand to receive from what you stand to receive from your private disability insurance policies.

Long Term Health Care Insurance

Pros:

  • The insurance provides the insured with the money to pay for long term care.
  • Any other benefits you get from other sources and other insurance policies will not affect the amount of benefit you will receive from this policy.
  • This policy not just covers disability but also old age.
  • The payments are not based on whether one can still work or not. It is based on whether the insured needs assistance due to the fact that he can't perform day-to-day activities.

Cons:

  • The premiums are usually higher with long term health care compared to disability insurance.
  • The premiums will also increase over time, especially if your condition becomes bad.

We suggest that you also ask for advice from your financial adviser or from your insurance agent to help you decide which policy will best fit your needs.

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