Long-Term Disability and Long-Term Care Insurance Policies
Ray Bourhis and Alexander MacDougall
There are various kinds of insurance that one may purchase in order to help maintain a somewhat regular quality of life in the event of a disabling condition. Perhaps the two most common of these forms of insurance are Long-Term Disability (LTD) and Long-Term Care (LTC) policies. For an insured that is considering either or both of these options, there are some important factors that bear keeping in mind.
In general, a LTC policy is one that is designed to provide a monthly benefit when the insured requires assistance in caring for him/herself. Benefits are meant to pay for healthcare services whether they are provided in a nursing facility, the insured’s own home, or at an adult daycare facility. The determining factor for eligibility for benefits usually hinges upon whether or not the claimant is able to perform the activities of daily living necessary in caring for themselves.
A LTD policy differs in that the benefits paid under the policy are meant to be income replacement and as such, they can be used however the insured sees fit. As income replacement, the benefits are payable only when the insured is able to prove that their disability is one that negatively affects their ability to earn an income. Note: some LTD policies require that the insured be disabled from their own occupation before benefits are paid, while others require that the insured be disabled from any occupation; this is an important distinction and the topic of another article.
Of course, insureds have the choice when considering insurance plans whether to purchase a LTD, a LTC policy, or both. When an insured obtains coverage under both types of policies issues may present themselves, whereas the process is usually much simpler when the insured only holds one policy, as there is little concern over how the provisions of that policy may interact with another policy.
However, even when an insured has both a LTD and a LTC policy and then becomes disabled, it is possible that the policies may not even overlap. For example, if an insured becomes disabled and is no longer able to continue working but is still able to care for themselves, they would likely only be receiving benefits under the LTD policy. If that policy’s benefits terminate at age 65 and it isn’t until after that point that the insured loses the ability to care for his or herself then coverage under the policies would not overlap.
If there is an overlap in coverage, it is very important to understand how the two policies will interact. For an in-depth discussion on the topic of how different policies may interact, please see our article titled “‘Other Income Benefits’ and LTD Insurance Policies.” When deciding which insurance policy or policies are right for you, it is very important to consider all of your options and then to study the language of each policy carefully to ensure that you know exactly what it is you are buying upfront.