Day 13 of the Legacy Notebook Series
We’ve covered life insurance, homeowners and renters insurance and auto insurance. Today’s focus is on any other insurance policy you carry. You want to have all your insurance information in one spot for reference. Think about any supplemental policies you might have. It could be a disability policy provided by your employer or through your credit union, or long-term care insurance, an accident or cancer policy (Aflac-type coverage).
Take a few minutes to list which of these policies you have, whether they are employer-provided or something you purchased individually. Find policy information for each and add it to your binder. If your policy docs are long gone or too far buried to deal with, request policy info from each provider. In most cases, it can be e-mailed or mailed to you quickly.
Long Term Disability Insurance
For some fortunate employees, disability insurance is employer-provided as a fringe benefit. If you are unsure whether you have disability coverage through work, check with your human resources department.
Many employers do not provide disability coverage and, as individuals, we don’t do a great job of seeking out disability insurance to protect ourselves. It is estimated that 69% of U.S. workers in the private sector do not have disability insurance.1
My husband has employer-provided long-term disability (LTD) insurance. Disability insurance isn’t part of my benefits package and I haven’t yet obtained a private LTD policy, so we are a pretty good representation of the stats.
Disability insurance isn’t only needed for workers in “higher-risk” jobs. Approximately 90% of disabilities are illness-related rather than the result of an accident.1 Cancer diagnosis and cardiac events are two of the major medical scenarios that often require people to spend weeks or months away from work while they undergo treatments, surgeries or rehabilitation.
The income replacement provided by LTD policies are not instantaneous. Most long-term disability policy benefits don’t kick in until you have been unable to work for six months, but then provide years of benefits thereafter (if needed). The average long-term disability claim is nearly three years in duration,1 so having a policy that provides benefits for several years can be a huge help in stabilizing finances during a lengthy illness or series of treatments.
If you don’t have long-term disability insurance, I encourage you to get a quote and get coverage in place (currently in the process of taking my own advice on this one).
If you are currently paying for short-term disability insurance, consider building up your savings to self-insure for short-term income disruptions instead. Typically short-term disability policies cover you for disabilities lasting ninety days – six months and are relatively expensive for the benefits provided. Establishing a sufficient emergency fund is a more cost-effective approach for managing short-term work absences.
Long Term Care Insurance
This is an area where I want you to avoid making our mistake. We bought long-term care insurance shortly after we were married. It was a group policy offered by an employer but was portable and had a fixed premium guaranteed never to increase. The benefits were adjusted annually for inflation and it provided for both home health care and nursing-facility care benefits.Because we were young, the monthly premium was fairly cheap. We thought it was a good idea and the smart thing to do.
We paid our monthly premiums for ten years…and then got a notice from the insurer that nursing home costs and the insurer’s rate of claims had gone up so significantly that they could no longer offer the LTC policy we had purchased. We had two options – swallow an 800% premium increase (so not happening) or cancel our policy. As a parting gift from this debacle, we have LTC benefits equal to the amount of premiums we paid over the years. In our situation, that’s roughly $7,000 so it should cover about 45 seconds of nursing home care in the event we need it. Awesome.
Don’t do what we did! There is a reason that most of the current advice regarding LTC insurance is to wait until you are in your 60’s to consider whether or not you need the coverage. Yes, it is way more expensive at that age but you’ll be in a much better position to find the policy that best fits your situation and needs than you can when you are buying this type of coverage decades earlier in your life.
Life Flight Cost Protection
This piece is primarily for my fellow rural-area dwellers. Those of you living in a city are likely thinking WHAAAT?, but this is a real thing to consider for those of us in sparsely populated areas. Life flight transportation from a rural hospital to a larger medical center can be crazy expensive and the fees are often only partially covered by major medical insurance. To help protect yourself from a medical air transport bill of tens of thousands of dollars, you can pay an annual membership fee that covers you and your family. In the event you need to utilize the medical air transport services offered through your membership program, you will not be charged any additional fees above what is covered by your health insurance. Having current health insurance is a requirement of membership for these types of programs.
Annual family coverage is typically less than $100 and the protection is well worth the cost for many people living in rural places. The trick, however, is to make sure you join the right membership program (the one whose air medical transport services are utilized in your area). For instance, we need the OmniAdvantage plan given our location. If there are multiple air ambulance providers in your area, you would need to join each membership plan to be covered because each program typically only provides the cost protection for flights on their aircraft. To make sure you apply to the appropriate membership program(s), call your local hospital to find out which air ambulance services are utilized.
Other Supplemental Insurance Policies
You may have some other supplemental insurance policies that need to be added to your notebook. Providers like Aflac offer specialized coverage (accident policies, cancer policies, etc). Often times credit union offer small life insurance, disability insurance or loan forgiveness policies. If you have any of these types of coverage in place, round up the details and add them to your notebook.
Today’s Action Items:
- Add your supplemental insurance policy docs (LTD, LTC, life flight, accident policy, etc.) to your notebook
- Take the initial steps to get quotes on any coverage you want to put in place but don’t have yet (LTD, I’m looking at you).
thanks for reading,
P.S. Looking for the rest of the series? You can find it here.
1 Source: Council for Disability Awareness
Stronger Wallet’s Legacy Notebook series information is intentionally general in nature and covers typical scenarios. You may have special circumstances that need to be considered. Always consult a trusted advisor before making big decisions about your financial legacy. Feel free to send me questions along the way at lesley[at]strongerwallet.com.
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