Disability Income and Long-Term Care Insurance
Disability income
Purpose: replace part of earned income (typically 60–70%) when illness or injury stops the paycheck. Definitions decide claims: own occupation (pays if you cannot perform your specific job) vs any occupation (pays only if unable to do any job for which reasonably suited by education, training, and experience). The elimination period is a waiting period (e.g., 60–90 days); the benefit period may be 2 years, 5 years, to age 65, or lifetime. Benefits are offset (integrated) with Social Security, workers' compensation, and group benefits. Residual/partial disability pays a proportional benefit for reduced income; presumptive disability pays full benefits for loss of sight, speech, hearing, or limbs; a recurrent disability clause treats a relapse within a stated period as a continuation.
Occupational coverage includes work-related injury; nonoccupational excludes it. Noncancellable means rates and renewability are fixed; guaranteed renewable means the insurer cannot cancel but can raise rates by class. Individually purchased policies paid with after-tax dollars produce tax-free benefits; employer-paid premiums produce taxable benefits. Business uses include key employee disability, business overhead expense, and disability buy-out.
Long-term care
Covers custodial care for chronic conditions: skilled, intermediate, custodial, home care, adult day care, respite care. Triggers: unable to perform 2 of 6 ADLs (bathing, dressing, eating, toileting, transferring, continence) for at least 90 days, or severe cognitive impairment (which generally waives the ADL trigger but not the elimination period). Features: elimination period measured in days of service, daily or monthly maximum, inflation protection, waiver of premium, nonforfeiture, and benefit restoration.
Trap: the 90-day ADL certification is not the policy's elimination period.