Long-Term Care vs. Long-Term Disability Insurance: Understand the Difference
The number of people 65 and older is projected to double to 98 million by 2060—to an estimated 24 percent of the American population. Understandably, we need more care when we are older and our risk of disability increases, more people are starting to think carefully about their insurance needs. Long-term care insurance and individual and group long-term disability insurance can provide peace of mind by covering the potential financial needs of growing older.
That said, long-term care and individual or group long-term disability insurance aren’t just for the elderly. Accidents happen and sometimes we wind up needing long-term care earlier than we expected.
Long-term care and individual or group long-term disability insurance policies offer much different protections. Often disabled people may also require long-term care and as a result, individual and group long-term disability insurance often get confused with long-term care coverage. However, long-term disability (individual and group) and long-term care policies provide different benefits.
What Is Long-Term Care Insurance?
Individual and group long-term care insurance covers expenses related to care that you may need when you cannot or need extra assistance caring for yourself. Long-term care insurance kicks in when a person can no longer perform at least two of six “activities of daily living” such as basic hygiene, dressing, eating, using the bathroom, getting in and out of bed, or walking around. A long-term care policy will generally pay for the costs and expenses associated with necessary care that isn’t covered by most health insurance policies. This could include in-home nurse visits, extended stays in a nursing home or rehabilitation facility, hospice care, or any other expenses incurred to perform these activities of daily living.
What Is Individual and Group Long-Term Disability Insurance?
Unlike a long-term care policy, individual and group long-term disability insurance pays an income-replacement benefit. In other words, individual and group long-term disability insurance covers the loss of income as a result of a long-term disability that interferes with your ability to reliably perform the important duties of your occupation with reasonable continuity and in the usual and customary way. You can use the benefits paid from your individual and group long-term disability coverage for whatever living expenses you need, and it isn’t limited to medical or daily care. Individual and group long-term disability insurance typically covers 50 to 60 percent of your income before you suffered your disability.
A Side-by-Side Comparison of Long-Term Care and Long-Term Disability Insurance
Certain types of insurance seem so similar and yet are fundamentally different, so a chart comparing the various features may help explain them.
|Long-Term Care Insurance||Individual and Group Long-Term Disability Insurance|
|What it covers||Expenses related to long-term care: nursing home, in-home care, assisted living, adult day care||Covers 50 to 60 percent of your income; policyholders may use individual and group long-term disability benefits in any way they deem appropriate|
|Triggering event||The policyholder is no longer able to perform at least two of the following six “activities of daily living:” ||Once you are unable to perform the material and substantial duties of your occupation, long-term disability insurance provides coverage after your elimination period ends|
|Age||Generally from the age of majority forward||Generally only provides coverage until age 65 or normal retirement age|
Keep these two fundamental differences in mind:
- Individual and group long-term disability covers your income, while long-term care covers out-of-pocket expenses for long-term care.
- Long-term care can provide coverage at any age, while individual and group long-term disability generally provides coverage only until age 65 or normal retirement age.
The Cost of Long-Term Care Insurance
Long-term care insurance can be expensive when compared to other types of insurance products—the average annual premium for long-term care coverage is $2,300. In addition, the premiums can and do go up in time. In the mid-2000s, long-term care premiums skyrocketed because insurers failed to accurately estimate the number of valid claims they would have to pay. The industry may claim that it doesn’t expect similar increases in the future, but nothing is certain, and that makes budgeting for this type of coverage difficult.
Long-term care, however, can cost far more than your premiums, as the national average is about $50,000 for a 12-month stay in a long-term care facility.
With long-term care insurance, policyholders can decide how much insurance they want to purchase, such as day benefits and the length of time the benefits would cover. Obviously, the policy becomes more expensive as the benefits and coverage period increases.
Finally, companies determine long-term care premiums by a policyholder’s age and health. Younger purchasers will get a better rate than older purchasers and married policyholders pay less than single purchasers.
Individual and Group Long-Term Disability Considerations
Individual and group long-term disability insurance are frequently called the most unused type of insurance. However, it covers what is most important for most people, their incomes. For most Americans, a disability that prevents them from earning a living would create immediate financial hardships.
Individual or group long-term disability insurance makes the most sense for those people who have at least 10 to 15 working years ahead of them. They aren’t close to retiring, and their income is likely their most valuable asset. As a result, a long-term disability could devastate their financial futures and their families.
If You’re Shopping for Coverage…
Insurance brokers and agents can offer a compelling case for why you need long-term care or long-term disability coverage, or maybe both. They can explain to you how the policies work, what they cover, and your premiums.
But what are they not telling you?
They are likely selling a particular product, and won’t tell you when other insurance companies offer better coverage for the same price. Or maybe they’re not telling you what this policy won’t cover, leaving you to figure it out in your moment of need.
A top-rated disability attorney or stellar ERISA lawyer at DarrasLaw can help you decide exactly what kind of coverage you need, make sure you understand the policy, and explain all of the fine print. DarrasLaw can provide you with objective advice because we don’t sell insurance.
Or If You Already Have Coverage
The first thing many people discover when they need to make a valid claim is the complicated nature of the claim process. The next thing they learn is that insurance companies protect themselves by wrongfully delaying, denying, and terminating benefits to policyholders who have dearly paid their premiums for years. An experienced disability attorney or top-rated ERISA lawyer can help you navigate the process and get the insurance benefits you are entitled to recover.
Contact a Top-Rated Long-Term Disability Lawyer or Experienced Long-Term Care Insurance Attorney at DarrasLaw Today
DarrasLaw is an award-winning, nationally recognized litigation firm that focuses on individual and group long-term disability and long-term care insurance. We help our clients get the coverage they need, and we fight the insurance companies who wrongfully delay, deny, and terminate valid claims. Our founding partner, Frank N. Darras, and his firms have recovered nearly $1 billion in wrongfully denied insurance benefits. Call us at (800) 458-4577 or contact DarrasLaw online to schedule a free policy analysis or free claim consultation.