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Disability, Accidental Death, and Long-Term Care Policies


Short and Long Term Disability and Accidental Death and Dismemberment Policies

Disability insurance is a type of wage-replacement insurance that covers a loss of income because of injury or illness. It generally only covers a percentage of your income for a period of a year or more. You must provide medical proof of disability in order to be eligible for coverage. The cost for this type of coverage is usually fairly low because the frequency of disability claims is very low. There is a greater chance that you will be disabled before age 60 than die, however. Though the risk of disability is low, it is very real, nevertheless. For this reason, every wage earner should include disability insurance as part of their financial plan regardless of the type of job that they have.

Disability insurance comes in two flavors: short term and long term. Short term disability insurance generally kicks in immediately after an incident that prevents you from working, and lasts for several months. Long term disability insurance doesn't kick in until after you have been disabled and unable to work for several months.

Along the same line as disability insurance is a special type of insurance called Accidental Death and Dismemberment (AD&D). AD&D policies are a combination of specialty life insurance and disability insurance. They will pay out proceeds to you in the event that you are dismembered (lose a limb or an important sense like eyesight), or pay out to your heirs in the event that you die in an accident. The problem with these policies is that the conditions that qualify for payment are very narrow. Dismemberment is frequently defined in these types of policies as the loss of both eyes, both arms, both feet, or an arm and a foot. If your injury does not fit into one of these categories, the insurance company will not pay out benefits. Because the likelihood of any of these things actually happening is so very low, AD&D policies are a bad idea. Even if, by some unlucky coincidence, you end up meeting the criteria for an AD&D payout, other types of insurance will pay first; if you are at work, your injuries will be covered under Worker's Compensation. If you are involved in a car accident, health or regular life insurance would apply. Although the cost for these policies is low, you would do better saving your money or using it to accelerate payment of any debts you may have.

Long-Term Care Insurance

Traditional insurance coverage limits the amount of care you can receive for extended episodes of illness. Further, there are many health care and quality of life expenses that health insurance will simply not cover, such as nursing home care for example. Health insurance, for the most part, is set up to address immediate, short-term illness or injury. What do you do then when there is no illness, per se, to treat but you require care nevertheless? What if your "condition" is merely a function of old age? The elderly all too often find themselves answering these very questions. Moreover, as life expectancy increases, more and more of the elderly will be affected by these issues. Long-term care insurance is the best option for them.

Long term care insurance covers the psychological, health, service, and social needs for people needing supportive assistance for extended periods. Pricing for long term care depends on the age and physical condition of the applicant. It is a bit expensive as far as insurance is concerned, but it is a lot cheaper than the cost of nursing home care, which can exceed $5,000 per month. Most people seek long-term care coverage when they are in their 50s. The cost of coverage is higher than if they had secured the coverage at a younger age. Long term care coverage is also easier to get at a younger age. The trade-off, though, is that getting coverage at a younger age means that you have to pay premiums longer. Additionally, some companies recommend waiting until middle age before apply for their long term care products.