Department
of Financial Services, Consumer eViews Volume 7 Number 23
June 4, 2010
When couples pledge to remain with each other for better or
worse,
very few of them actually plan for the worse. Although it is an unpleasant
thought, couples should have a plan should a serious, non-lethal injury befall
either of the spouses during their lives. In the final installment of this
series we will discuss two types of insurance that are useful for protecting
income, or assisting in paying assisted living expenses.
Disability Income Insurance – is designed to pay a weekly or monthly income for a specific period of time if a consumer suffers a disability and cannot continue or obtain work. The disability may involve sickness, injury or a combination of the two. The chances of a disability occurring are even greater than death and can affect the income of a married couple for an extended period of time. Disabilities occur every second of every day – over 85,000 disabilities occur each day.
When buying a disability policy, consumers should research the company’s definition of disability and the requirements that must be met, especially whether the company requires “own occupation” (the inability to perform the material and substantial duties of your regular occupation) or any occupation (because of sickness or injury you are unable to perform the material and substantial duties of your occupation, and are not engaged in any other occupation). This affects the circumstances under which benefits will be paid. Individual and group disability income policies must provide coverage for a policyholder or eligible dependent who becomes disabled. Disability income information is discussed in the Department of Financial Services’ Division of Consumer Services Health Insurance brochure, http://www.myfloridacfo.com/Consumers/Guides/Health/docs/health_2008.pdf.
Disability income insurance generally consists of two types; short term (a year or less) and long term (usually to age 65 or life). Most plans have an exclusion or waiting period. The longer the exclusion period, the lower the premiums can be. Most plans coordinate with Social Security in the event Social Security Disability is applied for and approved. If a consumer is applying for Social Security Disability, the consumer may wish to have the estimated amount withheld from the monthly benefit. If Social Security is approved and no deductions were withheld, the consumer may have to repay a substantial sum to the disability carrier.
Additionally, consumers should research the company from which they are considering purchasing coverage to make sure that they have a strong record of paying disability claims.
Long Term Care Insurance (LTC) – is a type of insurance developed specifically to cover the costs of long-term care services, most of which are not covered by traditional health insurance or Medicare. These include services in the home such as assistance with activities of daily living as well as care in a variety of facility and community settings.
There is a great deal of choice and flexibility in long-term care insurance policies. Long-term care insurance policies have a specific benefit period or benefit amount such as a daily benefit amount, as well as a lifetime benefit maximum, which is the total amount of time or total amount of dollars up to which benefits will be paid. Common benefit periods for long-term care policies are two, three, four, and five years, and lifetime or unlimited coverage. Most policies translate these time periods into dollar amounts and do not actually limit the number of days for which they will pay for care – just the overall dollar amount that the policy will pay.
Consumers who choose a daily benefit amounts (generally from $50 to $500/day) receive that daily amount for LTC expenses. Often you can choose whether you want the policy to pay the same daily benefit amount for care in all settings, or whether you want the policy to pay less for care in less costly settings, such as home care. Consumers who select a Maximum Lifetime Benefit, (i.e. $100,000 or $300,000) which is the total amount of money that may be paid for allowed charges for covered services and may correspond to a period of time such as 2, 3, 5 years, or an unlimited period of time, will receive a lump sum amount. DFS Division of Consumer Services has a brochure on their website at http://www.myfloridacfo.com/Consumers/Guides/Health/docs/LongTermCare2009.pdf.
It may be worthwhile to note that Long Term Care Insurance is not appropriate for everyone and that a new Federal option may also be in the future.
The Insurance Consumer Advocate is appointed by Florida CFO Alex Sink and is committed to finding solutions to insurance issues facing Floridians, calling attention to questionable insurance practices, promoting a viable insurance market responsive to the needs of Florida’s diverse population and assuring that rates are fair and justified.