Life, Disability and Long-Term Care Insurance

Life Insurance

A life insurance policy is a contract between you and an insurance company. The contract states that you will pay premiums over time and, in exchange, the company will pay a lump sum amount upon your death to a designated beneficiary. The proceeds from your life insurance policy can help pay bills and help support your surviving family members' living expenses.

There are two main types of life insurance policies:

• Whole (or universal) life insurance policies are considered permanent. As long as you pay the premium, the policy is in effect. Whole life insurance policies also have an investment or savings component. This means that you accumulate cash value over the life of the policy, so you can borrow money from these policies if you need to.
• Term life insurance policies are in effect for a certain period of time, or term. If you have this type of policy and pass away during the policy's term, then the insurance company will pay a benefit. If you live past the time that the policy is in effect, the insurance company won't pay a benefit or give you a refund.

Term life insurance policies are usually less expensive than whole life insurance policies. This is because term life insurance policies only cover a set length of time, while whole life insurance policies are intended to be permanent and part of your premium is put away for savings.

If you have misplaced a life insurance policy, your state's insurance commission may be able to help you locate it, or you can search for it at http://www.mib.com/lost_life_insurance.html. If the insurance company knows that an insured person has died, but cannot locate the beneficiaries, the company must turn the benefits over to the state's unclaimed property office. Check with that office at https://www.unclaimed.org/ if you believe that you are due a benefit. Avoid losing your life insurance policy benefits by alerting the policy beneficiaries and filing a copy with your will.

Long-Term Care Insurance

Medical advances have resulted in a greater need for nursing home care and assisted living. Most health insurance plans and Medicare severely limit or exclude long-term care. You should consider these costs as you plan for your retirement.

Here are some questions to ask when considering a separate long-term care insurance policy:

• What qualifies you for benefits? Some insurers say you must be unable to perform a specific number of the following activities of daily living: eating, walking, getting from bed to a chair, dressing, bathing, using the restroom and remaining continent.
• What type of care is covered? Does the policy cover nursing home care? What about coverage for assisted living facilities that provide less client care than a nursing home? If you want to stay in your home, will it pay for care provided by visiting nurses and therapists? What about help with food preparation and housecleaning?
• What will the benefit amount be? Most plans are written to provide a specific dollar benefit per day. The benefit for home care is usually about half the nursing home benefit, but some policies pay the same for both forms of care. Other plans pay only for your actual expenses.
• What is the benefit period? It is possible to get a policy with lifetime benefits, but this can be very expensive. Other options for coverage are from one to six years. The average nursing home stay is about 2.5 years.
• Is the benefit adjusted for inflation? If you buy a policy before age 60, you face the risk that a fixed daily benefit will not be enough by the time you need it.
• Is there a waiting period before benefits begin? A 20- to 100-day period is not unusual.

Visit http://longtermcare.gov/ for more information.

Disability Insurance

Disability insurance helps you replace lost income, if you are unable to work due to sickness or injury. Many employers offer some type of disability insurance coverage for employees, or you can get an individual disability insurance policy. There are two types of disability policies: short-term disability (STD) and long-term disability (LTD). Short-term disability policies have a maximum benefit of two years, while long-term disability policies have benefits that can last the rest of your life.

When purchasing disability insurance, ask the following questions:

• How is disability defined? Some policies consider you disabled if you are unable to perform the duties of any job. Some plans pay benefits if you are unable to do the usual duties of your own occupation.
• When do benefits begin? Most plans have a waiting period before payments begin.
• How long do benefits last? After a specified waiting period, LTD payments are usually available until you reach age 65. Shorter or longer terms are also available.
• What dollar amount is promised? Can benefits be reduced by Social Security disability and workers' compensation payments? Are the benefits adjusted for inflation? Will the policy provider continue making contributions to your pension plan so you have retirement benefits when the disability coverage ends?

Get more information from the Insurance Information Institute. Visit the website at http://www.iii.org/.