Most employers offer some kind of disability insurance, but you should find out exactly what your employer offers before you have to file a claim. Most allow some short-term sick leave, which might last from a few days to as long as six months.
Five states and Puerto Rico have Temporary Disability Insurance (TDI) programs to provide income support to individuals who are out of work because of a non-work-related illness or injury.
Disability insurance is critical protection against loss of income, but if your employer doesn't provide it, it can be an expense. Learn how to save on your policy.
Disability premiums are based on your age, sex, occupation and the amount of potential lost income you are trying to protect.
In general, the lower the chance that your occupation puts you in harm’s way, the lower the premium. The higher the chance of injury, the bigger the premium. So, for instance, an accountant working in an office would have much lower disability premiums than a construction worker.
There are two types of disability policies: Short-Term Disability (STD) and Long-Term Disability (LTD):
Short-Term Disability policies - have a waiting period of 0 to 14 days with a maximum benefit period of no longer than two years.
Long-Term Disability policies - have a waiting period of several weeks to several months with a maximum benefit period ranging from a few years to the rest of your life.
Disability policies have two different protection features that are important to understand:
Forty-three percent of all people age 40 will have a long-term disability event by age 65. Learn how you can replace lost income and help protect you and your family from an otherwise financially catastrophic illness or injury.
Medicaid is a state-government-administered program that pays the medical and long-term care expenses of poor people. If you have more money than your state permits when you need long-term care services, your state’s Medicaid won’t pay for those services. You’ll have to spend your own money–including using up your assets–until you become poor enough to qualify.
If you're under 55, you might think that, since the likelihood of long-term care outlays is many years in the future, you could invest the money you might otherwise spend for long-term care insurance premiums. That way, if you do need long-term care, you could just draw upon that investment, and if not, you’d have money for your heirs, for a charitable donation, or for your own needs.
The tips below will help you save money wisely, but don’t rely on price alone.
Key factors in choosing a policy
Company financial stability - Because you may not collect for decades to come, be sure to buy from a company that has been around for some time and is financially stable. You may want to look up, from an independent rating agency, the financial strength ratings of a company you're considering.
There are various questions and issues to keep in mind when choosing a long-term care policy.
Where may care occur?
The best policies pay for care in a nursing home, assisted living facility, or at home. Benefits are typically expressed in daily amounts, with a lifetime maximum. Some policies pay half as much per day for at-home care as for nursing home care. Others pay the same amount, or have a "pool of benefits" that can be used as needed.
In general, it's a good idea to buy long-term care insurance before you’re 60, for two reasons:
The younger you are, the less likely it is that you’ll be rejected when you apply for the policy. If you apply in your 50s, there’s a one in ten chance you’ll be rejected. If you apply in your 60s, the chance of rejection is two in ten. If you apply in your 70s, the chance of rejection is four in ten.