, like , is used to protect future - disability will replace your in the that you become physically unable to . Although it gets less attention than life insurance, agree that disability is at least as important.
While mostare prepared for the medical of severe or sickness (through ), without disability insurance, they are not prepared for the of that accompanies such a tragedy. In general, if you on your to the and , you should seriously consider disability coverage.
Disability Insurance Policies
Many employersdisability insurance for their ; however, the plans vary greatly, and some may not offer . Furthermore, any disability payouts from an employer's are , while payouts from are not. Individual disability coverage is generally much more expensive than disability coverage; nevertheless, you should any policies your employer has taken out, and consider individual coverage if the policy is insufficient.
Disability insurance comes in two: and .
- Short-term disability - This coverage replaces a portion of lost in the event the policy misses six or less of work. The coverage typically begins after all sick leave is exhausted, and replaces close to 100% of wages for the first payouts. If the policy owner remains unable to work, however, the will eventually , often to 60% of wages. The length of coverage and vary from to plan, but these numbers are .
- Long-term disability - Some experts contend that long-term disability insurance is the most important insurance you can . This can be partially attributed to in medical ; some diseases and injuries are now disabling rather than deadly, meaning that the incapacitation can be lengthy.
Typically, long-term disability insurance can be purchased to replace 50-70% of salary. Some employers allow employees to purchase extra insurance from the same, sometimes raising the total to 80%. , however, that some policies have monthly maximum payouts, which may reduce the actual percentage of salary the policy owner receives. The "salary" is at the time the policy is purchased, and you will likely to increase the of the plan as your compensation increases. Some plans only allow increases with a physical, some allow increases without a physical for the first few years of the plan, and some have other ; check the plan for its particulars.
Long-term disability policies vary in the length of: some policies will only pay out for 5 or 10 years, some will pay out until age 65. Experts recommend the latter. Policies also vary in definition of disability (some contentious categories include mental illness and back injuries) and exclusionary (pre-existing medical , injuries from dangerous , etc.).
Policies can be 'guaranteed renewable' and 'non-cancelable.'
- the insurance company cannot drop the policy, unless payments are skipped.
- Non-cancelable means the insurance company can never the premium on the policy. Both are desirable, but non-cancelable is usually best.
There are a few important policy(or "riders") that should be considered: "residual benefits" and "cost of living" ( ).
- The provides the difference between old and new , in the event that the policy owner can get a new job, but not one with the same salary as his old one.
- The allows the policy's value to increase with .
Finally, a disability policy can be designated as an "own-occupation" policy. Most policies are "any-occupation," which means the policy owner must work when he is capable, even if not in the sameas before. An "own-occupation" policy will allow the owner to collect benefits until he can the previous . Typically, these policies are more beneficial to policy-owners with high-skill or high-paying jobs.
is not a or surrogate for disability insurance; at the most, it should be a resort for those who can't get coverage. Not everyone is eligible for Social benefits, even once disabled - the must have significant work history, must have been unable to work for a year or more, and must not be to work in any capacity.
Long Term Care Insurance
Spending a long time in a nursing home, or under home care, is not something people like to think about; nevertheless, as medicalincreases the , a growing number of are finding themselves unable to live independently. At the same time, extended nursing home and home care is becoming extremely expensive, primarily due to rising medical costs. these , and is something people in their late 50s to 60s should seriously consider purchasing.
Long-term care policies generallyextended health care at home, nursing homes, or assisted-living . However, policies do not necessarily pay out in the same amounts for each of these ; most notably, policies tend to pay less for home care. Like long-term disability coverage, policies also vary in their eligibility criteria; in this case, the determination of when someone can no longer live independently. Experts say an ideal plan's eligibility criteria includes and inability to perform one or more activities of living, and does not require previous hospitalization or home care.
Policies vary in their length of payout, from a couple years to "lifetime." Obviously a lifetime policyhigher premiums, but not much higher - the typical nursing home lasts less than 3 years, meaning the of a lifetime policy to the is not that much greater than a 2 or 3-year policy. Policies have a set of time between when care starts and when the benefits take effect (analogous to a in other types of insurance coverage). The longer the is, the lower the premiums.
Finally, like long-term disability, long-term care policies can be "guaranteed renewable", meaning the insurance company can not drop the policy. Most experts recommend a policy that is guaranteed.