The Case for Long-Term Care Insurance and Disability Insurance
By Marc Glickman
More employers are considering a long-term care insurance benefit for their employees.
This additional benefit can help attract and retain great talent and also help employees better plan for their own futures. Since many employers already offer disability insurance (DI), there may
be some confusion around the need for long-term care insurance (LTCi) and the differences between disability insurance and LTCi.
Let’s take a moment to learn the differences between DI and long-term care insurance. Both benefits have a place in an employee’s overall financial plan. Long-term care insurance and disability insurance are both designed to help someone cope with a loss of function but for different purposes. However, they have some commonalities, including:
● Group coverage may be available with limited or no health underwriting
● If purchased as individual coverage with more comprehensive benefits, require health underwriting
● They both fit into a comprehensive financial plan
Let’s look at each type of coverage. What is long-term care insurance?
Where disability insurance covers a loss of income, long-term care insurance covers the cost of care for people who need assistance with activities of daily living due to chronic illness, disability, or aging.
Long-term care insurance can help protect one’s assets and income from being depleted by expensive bills and provide peace of mind.
Reasons why someone would want to purchase long-term care insurance are:
● To have more choices and control over the type, quality, and location of care they receive, whether it is at home, in a facility or in a community setting
● To avoid relying on family members or friends for caregiving, which can be stressful, time consuming and emotionally draining for both parties
● To reduce the risk of becoming impoverished or dependent on public programs such as Medicaid, which may have limited coverage and strict eligibility requirements
● To take advantage of tax benefits and incentives that may be available for long-term care insurance premiums and benefits
● To plan and ensure that they have adequate resources and support to meet their long-term care needs
Liam’s LTCi Story
Liam had always been a healthy and active person. Even well into his seventies, he maintained an active lifestyle. One day he started feeling tired and nauseous but thought it was just a flu bug. After several weeks, he decided to see his doctor, who ran some tests and delivered the shocking news: Liam had kidney cancer. He needed surgery to remove the tumor, followed by chemotherapy and radiation.
It also meant that Liam would need long-term care.
Fortunately, when Liam was 55 years old, he met with a long-term care insurance (LTCi) specialist who suggested he consider adding LTCi to his financial plan.
Because Liam was in good health, he was approved for an LTCi policy. Fast forward 20 years and as Liam started chemotherapy and radiation, his LTCi policy gave him the financial means to be able to consider several options for his extended care, including home care and assisted living. He and his family decided on a local assisted living facility that provided him with meals, transportation and social activities. He felt comfortable and supported in his new environment, and he made friends with other residents who were going through similar challenges.
Long-term care insurance gave Liam and his family peace of mind during a difficult time. It allowed him to choose his care options and maintain his dignity and
independence. It also protected his financial security and legacy for the future.
How do you obtain long-term care insurance?
Many people obtain long-term care insurance from a private insurance company. However, more employers are offering a group plan — one of the simplest and most cost effective ways
to get coverage. Often these policies are a guaranteed issue group benefit. The enrollment process can be as simple as filling out an enrollment form. Group LTCi or hybrid plans are also portable to an individual plan upon leaving the company or retirement.
Offering employees a base plan allows them to then consider an individual supplemental plan that may provide even greater coverage.
Getting individual coverage can be more complicated but also offers greater benefits overall. There will be an underwriting process that involves responding to health related questions. You
will also have to undergo a medical exam. The insurance company will then determine your eligibility and premium based on your age, health and the level of coverage you want. You can compare different policies and rates from different companies before you make a decision. Individual long-term care insurance can be more expensive than obtaining coverage through an employer,
but it can also provide much greater protection. Life insurance with an LTCi rider are hybrid policies that provide a death benefit to beneficiaries if care is never
needed. These group hybrids are more commonly offered than group standalone LTCi in the market today.
What is disability insurance?
Disability insurance is a type of insurance product that can protect against a loss of income if a policyholder is prevented from working due to a disability.
A disability can be caused by an illness or injury that affects the ability to perform core work functions. Disability insurance can replace a portion of the policyholder’s base salary, usually 40 to 70%, up to a certain limit.
Reasons to purchase disability insurance include:
● Can provide financial protection and peace of mind for people who rely on their income to support themselves and their families.
● The risk of becoming disabled for an extended period is higher than many people think.
According to the Social Security Administration, more than one in four 20-year-olds will experience a disability for 90 days or more before they reach 67.
● Without disability insurance, a loss of income due to a disability can have serious consequences, such as difficulty paying bills, saving for retirement or maintaining a standard of living.
Remember that DI is to protect against loss of income.
That means that when employees retire, there is no longer a need for it.
Zoey’s DI Story
Zoey, a software engineer at a major tech company, was driving home from work when a truck ran a red light and hit her car. She was rushed to the hospital with a broken leg and had to undergo multiple surgeries. She was unable to work for three months and faced mounting bills and living expenses. Fortunately, she had taken advantage of the disability insurance offered by her employer.
It covered 60% of her income while she was recovering. The insurance company also provided her with a case manager who helped her navigate the healthcare system and access the
resources she needed. Alice was grateful for the coverage as it protected herself and her family from financial hardship.
How do you obtain disability insurance?
There are two main ways to obtain disability insurance: through an employer or as individual coverage. Many employers offer short-term and/or long-term disability insurance as part of their employee benefits package. These policies are typically cheaper and easier to qualify for than individual policies, but they may have lower benefits, longer waiting periods, or
stricter definitions of disability. They also may not be portable, meaning an employee could lose coverage if they change jobs.
Purchasing disability insurance as an individual can be done directly from a broker. These policies are more expensive than offering it to employees as a group benefit and require medical
underwriting. On the other hand, they offer, more flexibility and customization. You can choose the benefit amount, duration, waiting period, and definition of disability that suit your needs and budget. You can also keep your coverage as long as you pay the premiums, regardless of your employment status.
The Bottom Line: Peace of Mind and More Options
By now it’s clear that both disability insurance and long-term care insurance have a place in any employee’s financial plan.
Disability insurance and long-term care insurance are two types of policies that can help protect income and assets in case of a serious illness or injury. Disability insurance provides a continuation of income if the policyholder is unable to work due to a covered condition, while long-term care insurance covers the cost of services such as nursing home care, assisted living, or home health care – very real expenses that are not covered by health insurance or disability insurance.
By purchasing both types of insurance, employees can ensure that they are protected for different scenarios that might create tremendous financial hardship in the future.
Marc Glickman, FSA, CLTC, is CEO and co-founder of BuddyIns, a leading long-term care insurance education, marketing and technology company. Marc is a licensed insurance agent in all 50 states and serves on the Board of Advisors for CLTC. Marc has over 15 years of experience as an actuary including as the chief investment officer and chief sales officer for a major LTC insurance company. Marc earned his degree in economics from Yale University. In 2019, Marc was named one of the top 20 innovators in the insurance brokerage space.
California Broker is pleased to have a collaborative relationship with Marc Glickman and his specialists. This gives our subscribers looking for LTCi case design help the option to
use the LTCi portal we have set up with Marc and Buddy Insurance. Marc has a platform to help health and life insurance professionals learn more about LTCi and refer clients — or learn how to write LTCi policies using his process.
If you would like to collaborate on LTCi, you can find help through the online portal listed below. Try the portal and see how you can get LTCi case design help, make referrals to LTCi specialists who will collaborate with you and help you help your client. You will share in the success of a LTCi sale from your referrals.
Once connected with a LTCi specialist, you can decide for each client if you want to stay involved in your client’s case each step of the way leading to a successful LTCi policy sale or refer your client and get process updates. Some brokers will want to learn the LTCi business. This platform provides this and helps brokers through the process. In future articles we will share how the process works.
CONNECT to the Buddy Insurance LTCi PORTAL HERE: http://www.buddyins.com/calbroker