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What is the difference between long-term care insurance and long-term disability insurance?

Long-term care insurance and long-term disability insurance are commonly confused, and the two do have several things in common. Both are designed to help protect one’s assets and are triggered by impairments in one’s health or ability to perform certain tasks. The premiums for both LTC and LTD insurance vary based on age, size of benefit, and the length of the waiting or elimination period before benefits become available. However, there are also key differences between them.

Long-term care insurance is used to cover the cost of long-term care, including help or supervision with daily tasks such as bathing, getting dressed, and remembering to take medication – all of which can become difficult later in life. The frequency with which LTC insurance benefits are received will depend on the details of the plan itself, though many plans pay out a set daily benefit. Long-term care insurance can be purchased through some employers, though many choose to buy an individual policy from an agent or broker.

Long-term disability insurance focuses on protecting one’s future earnings. It provides a steady stream of income to help cover necessary expenses if you develop a serious illness or have an accident that prevents you from working for a prolonged period. What qualifies a person as being “disabled” may be specific to their particular to their field of employment or something more generic. LTD insurance typically pays 60% of your usual wages and can be used to supplement Social Security disability payments. The benefits from an LTD insurance plan come as direct monthly payments. This type of insurance can be purchased through many employers and professional associations. Look for a plan that is non-cancellable and has fixed premiums. It should be noted that long-term disability insurance will only pay benefits until age 65. This type of insurance is not widely known or talked about, but can be greatly beneficial in many situations.

It is possible to cover one’s bases and have both types of insurance at the same time, though the combined premiums will be too high for many to afford. If it comes down to a choice between one or the other, consider how dependent you are on your income. If you are still working, don’t have a lot saved for retirement, and rely on your salary to pay for living expenses – particularly if you are single or the main provider for your household – long-term disability insurance is probably the better choice. If you have a pension plan and solid retirement savings, you may want to lean towards long-term care insurance. The amount of time between now and your retirement is also important. Keep in mind that disability insurance is only good until age 65, so if you want to get the most out of it, you will want to invest in it at least 10-15 years before that point.

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