November 30, 2018

Q:  I’m in my 50’s and I’m very concerned that some sickness will happen to me in the next 10, 20, 30 years where I must stay home and cannot function normally. I’m fearful I won’t have enough money to pay a caregiver and I’m put in some care facility for the poor. How can I protect myself?

A: In order to protect yourself and your family, you should consider purchasing a long-term care insurance policy.

AARP estimates that 60% of those over age 65 require some type of long-term care during their lives. Long-term care needs caused from an accident related injury or chronic illness can be financially devastating. Long term care insurance (LTCI) can help you protect against that.

The younger and healthier you are when you apply for LTCI will result in more affordable premiums.

If you have family history of illnesses that typically require long-term care, but that are not covered by traditional medical insurance policies, you may want to consult with an “elder law attorney” knowledgeable about long-term care. Check the web site for the National Academy of Elder Law Attorneys at www.naela.org.

You also need to consider if you’re going to get care from the person you live with or other family members.

Long term care insurance premiums are deductible within certain limits.

Q: I have my own trucking company. I’m healthy but what if I get sick for an extended period of time or have an accident where I’m out of work for six months? I won’t be able to support my family. What happens to my business?

A: You should consider obtaining disability insurance. It’s important because if you are unable to work for an extended period due to sickness or accident, disability insurance can provide an income flow enabling you to continue paying the expenses, for you and your family and to keep you from falling behind on your mortgage payments. There is also Business Overhead Expense Disability Insurance (BOE) for your business expenses. You would need to have someone (your wife, relative, friend, help operate your company, if possible. The difficult part, if you are the sole driver for your company, is to find a competent driver.

In essence, disability insurance can replace income that is lost when you are sick or injured and cannot work for a long period of time. Overhead insurance may cover expenses directly related to your business.

One of the leading causes of home foreclosures is disability. However, only about 34% of adults have disability insurance. More than 375,000 Americans become totally disabled every year. Approximately 8 million adults have some disability that limits or prevents them from working.

The goal of disability insurance is to replace as much income as possible with affordable terms. Insurance experts recommend that disability insurance equal 60%-70% of net income or profit before taxes. The normal waiting period before receiving benefits is 90 to 180 days, but the insured can elect a shorter or longer waiting period with changes to the premium cost. You should always plan on having 3 to 6 months living expenses saved at any given time before any sickness or disability.

Listed below are the features of a good disability plan:

Non-cancelable and guaranteed renewable; monthly benefits that replace 60%-70% of the insured’s income until reaching Social Security full retirement age 65 or older; cost of living adjustment to protect benefits from inflation; elimination of premium payments while the insured is disabled; residual benefits clause (allows partial payouts for partial disabilities); future insurability option to increase insurance as income rises (regardless of health); waiting period to begin receiving benefits (normal is 90 to 180 days) and rehabilitation clause to pay for treatment necessary to get back to work. Please consult your certified insurance agent for advice.

Generally, if you do not deduct the disability insurance premiums, the benefits received are tax free.