Disability Insurance vs. Long Term Care Insurance

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Tax qualified Indemnity Long Term Care Compared to Individual Disability Insurance

Benefit

LTCI

             You select the benefit from $1500 per month to $12,000

Disability Insurance

The benefit is tied to your income and other coverage one may have in force.  Typically the company can offer 55% of gross income.

 

How to qualify for a claim

LTCI

            The insured has the  inability to perform two of six activities of daily living or have a severe cognitive impairment-severe memory loss, Alzheimer’s disease.  This is expected to last 90 days or longer. 

Disability Insurance

            The insured has a sickness or accident and is unable to perform the duties of his/her regular occupation.

 

How are benefits paid

LTCI

            Benefits are paid in cash to the insured regardless of whether care is received for the condition.

Disability Insurance

            Benefits are paid in cash to the insured

 

Elimination period

LTCI

            Can be from 90 days to one year. This is satisfied once per lifetime

Disability Insurance

            Can be from 30 days to one year.  This is satisfied every claim

 

Maximum Benefit

LTCI

            Expressed in years from as short as one year to unlimited.  The maximum benefit, if less than unlimited, is per lifetime not per claim. 

Disability Insurance

            Expressed in years from as short as one year to as long as a lifetime.  The maximum benefit depends on the age of the insured at the time of claim.  The maximum benefit is per claim without limitation to number of claims during the insured’s lifetime. 

 

Can the policy be canceled

LTCI

            Can be canceled for non payment of premiums only.

 

 

 

Disability Insurance.

            At older ages there is a requirement that the insured be working on a full time basis to maintain the coverage.  If not working on a full time basis, the coverage will be cancelled. 

 

Are premiums deductible

LTCI

            Premiums may be deducted with the benefits coming in on a tax free basis.  The amount of deductibility increases with age and is indexed annually

Disability Insurance

            Depending on the business structure of the insured, they may be deducted.

 

How are benefit taxed.

LTCI

            Benefit are tax free for the first $113,000 (2012) regardless of whether the premiums are deducted.

Disability Insurance

            If premiums are deducted, the benefits are taxable.  If no deducted the proceeds are income tax free with no limitation.

 For more information about disability insurance or long term care insurance, contact Set for Life Insurance today!

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