Importance of Long Term Care & Disability Insurance in Your Financial Plan

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What is a financial plan? I define it as a road map to a confident financial future. Risks are identified, planning opportunities are strategized and the likelihood of accomplishing all financial goals is increased.

A vital component of any high net worth financial planning necessarily includes risk management. So, when you prepare or review your financial planning worksheet, do not miss prioritizing the protection of your two most valuable assets with long term care and long term disability insurance.

What are the two most valuable assets that long term disability (LTD) and long term care (LTC) protect?  One’s income and retirement nest egg. Most people rely entirely on their income to meet every day expenses and to save for their future. Should one’s ability to earn income be interrupted by sickness or injury, it often results in significant financial hardship. Long term disability insurance is one strategy specifically designed to restore a percentage of the income one would forfeit due to a disability.

Similarly, when we retire, it is our retirement nest egg that we rely upon for most of our living expenses.  Should one retire and have a long term care need, the associated costs can easily consume a well-funded retirement. Having a long term care policy can help absorb some or all of those expenses, preserving your retirement nest egg.

One common misconception is that long term disability and long term care policies should be owned at different points in life – one while you are working and the other after you retire. We disagree. Whenever it is suitable for a client, we recommend owning both. Our reasoning for this comes from the hardship that a disability can cause and the complimentary way benefits from both policies can be received by one person.

There is nothing inexpensive about being disabled. Nearly all of one’s normally-occurring expenses continue but now there are new expenses of medical bills and the recuperation process. The benefits from a disability policy almost certainly will be insufficient to cover all of this. Should the disability also qualify as a long term care claim, one can also receive LTC benefits to help pay for caregivers to help in the recovery process –sparing family from having to become caregivers while hopefully accelerating the healing process for the disabled. Typically, this is all paid for by the insurance company, thereby protecting your finances.

By the time one retires, their disability insurance will have served its purpose of protecting the income-earning years and only the long term care insurance will remain in-force. But by understanding how these different insurance policies correlate together, your Wealth Planning team can help you protect your two greatest assets and help you pursue the goals of your financial plan.

 

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