When Should you Trade in your Disability Insurance Policy for Long-Term Care Insurance?

At what point in life should you consider trading in your disability insurance for traditional long-term care insurance or a hybrid life and long-term care policy? The purpose of disability insurance is to protect your income in the event you become sick or hurt and unable to fulfill the duties of your occupation. In the early years of your career, a disability that would prevent you from working would be detrimental to your and your family’s immediate and future financial security. When you are young most often your most valuable asset is your earning potential. Disability income insurance will replace your income in the event that you are physically unable to work. Benefits typically are paid until you reach security retirement age.

As you age and build a nest egg, your best income producing years are most likely behind you. At this point, it’s essential that you protect your wealth in the event that you are in need of long-term care. Nobody plans to need long-term care, yet currently 40% of Americans receiving long term care benefits are between the ages of 18 and 64. This translates into millions of Americans whose financial independence and retirement dreams are at risk. A long-term care insurance policy can help you cover the costs associated with care whether it is in your home, in a nursing home or in an assisted living facility.

Typically once you have reached your social security retirement age, disability insurance will no longer pay and you can transition to a long-term care insurance policy. You may want to consider transitioning earlier or, if cash flow permits, holding both types of policies. We recommend starting to look at long-term care insurance when you are in your mid 50’s.

Pull your old disability and life insurance policies out of your file cabinet and see if your financial needs have changed since those policies were originally purchased. You may find that your needs have changed and that you no longer need to maintain the amount of coverage that was necessary when you had children at home, less money in your 401k, a lower salary, etc. It may be to your advantage to purchase traditional long term care or a combination hybrid life insurance and long-term care insurance plan. These hybrid plans provide benefits upon death or prior to death in the event you need long-term care. Always remember that we are just a phone call away and are here to answer any questions or concerns you may have.