Quite often, people have a tendency to get confused about this subject. When people are asked how they plan to protect their assets and income in case of a long term care situation, almost every time answer is the same; "Well I have a disability insurance..."
Confusion starts with the definition of Disability Insurance where people get Short Term Disability and Long Term Disability confused with Long Term Care. There is a distinct difference between the two insurance plans and in order to have a better understanding of the difference, we need to know what each insurance vehicle offers as protection.
We'll start explaining what Disability Insurance offers without going into too much detail as in Long Term or Short Term Disability: In a nut shell, Disability insurance provides a portion of your income for a certain period of time when you are disabled while you are employed. What this means is when you get disabled, you may receive up to 40, 60 or maybe 80 percent of your total income for a specific period of time. Further more, this also means two things:
(1) You are not going to receive any supplemental income for the cost of your care through your disability insurance; all you are going to receive is the portion of your income.
(2) You will receive a portion of your income for a specific period of time. When this period is over, your income from your disability insurance will seize.
So you can actually see that the benefits of Disability Insurance are very specific and limited. Nevertheless this simply doesn't mean that Disability Insurance is not a valuable protection plan. When you learn the benefits of Long Term Care Insurance, you should be able to understand that the two protection plans take separate and important precedence in our lives.
Before we get into the benefits of Long Term Care Insurance, we need to clear out one misconception about this insurance plan; Long Term Care Insurance is not necessarily some insurance plan that you purchase to get care when you are older, and it is not particularly a nursing home care either. People get into Long Term Care situation in younger ages too and Long Term Care Insurance is a great protection plan that provides many valuable benefits.
Among many of these benefits, of course the most important one is to provide funds for your care when you are unable to do some of your daily activities. This is actually the main difference between this plan and the Disability Insurance; Long Term Care Insurance does not provide income or any portion of your income, it actually pays for the cost of your care up to certain amount which is determined within your policy. In other words, Disability Insurance provides you a portion of your income where Long Term Care Insurance actually pays for the cost of your care. Now you can see the importance and the complimentary nature of the two insurance plans; while you are receiving a portion of your income through your Disability Insurance - which is always less than your regular income, you will also have your Long Term Care Insurance paying for the cost of the care that you are receiving.
Considering the present high cost of care, and having to pay for it with a limited income may become an enormous financial burden. This is one of the most important reasons why these two insurance plans exist. It is also as important and highly recommended that you should consult an insurance professional who can coordinate and design these policies according to your specific personal needs for your full protection.
Remember, you must protect the most important asset in your life: Your Earning Power!
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