Long Term Health Insurance
Two things we don't want to think about..............but really should
Long Term Health Insurance
By Robert D. Hershey Jr. : NY Times Article : February 25 2007
INSURANCE, they say, is one product you can’t buy when you need it most. When it comes to coverage for long-term care, however, a myriad of choices makes even timely buying a daunting process.
Although industry statistics indicate that more than two of three people turning 65 will eventually need such care — which may be provided in a nursing home, assisted-living facility or at home — even deciding whether you should buy long-term care insurance is a challenge.
Then there’s the design of the actual policies, which may be customized for each buyer’s pocketbook and unknowable health future.
“There’s a million different variations and permutations,” said Steve Killiany, a planner and long-term care specialist at the West Financial Group in Bethesda, Md. “There’s the benefit period, the amount of daily benefit, inflation protection, the waiting period” and other considerations like the financial strength of the insurance company.
The popularity of these policies is arising from several factors, including the climbing cost of health care, longer life expectancies, and a desire to avoid relying on family members who may live far away for care. If you’re wealthy enough, of course, there may be little need for this coverage. If you’re poor enough, Medicaid will pick up the bill. Not only is there a huge middle ground between rich and poor, but people differ in their desire to draw down assets instead of passing them along to the next generation.
A couple with $1 million, for example, may want to be sure that they leave a legacy big enough to put a grandchild through college, rather than risk draining all their funds if they need care for a long time. Mr. Killiany generally considers those with assets of $200,000 to $4 million as candidates for long-term care insurance, but other experts shun any upper limit.
“Money is a very touchy subject,” said Jesse R. Slome, executive director of the American Association for Long-Term Care Insurance, an agent trade group based in Westlake Village, Calif. “Some people are unwilling to spend what they’ve accumulated and sometimes kids don’t want them to.”
If you decide to join the eight million Americans who now have long-term care policies, either individually or through employers, an even tougher question may be when to buy.
There is no simple answer, but Mr. Killiany suggests doing so around the age of 50, when you’re relatively young and probably healthy enough to qualify for a modest premium.
You’ll be wise to compare terms of two or three different companies and, if you have the opportunity, a group plan. In general, healthy people do better with individual policies; those in poor health or with a family history of disease, may do better in a group. Industry leaders are companies like John Hancock, MetLife, MassMutual, Prudential and Genworth.
A typical company policy for a 65-year-old buyer might pay benefits of $150 a day for three years — a total of about $164,000 — with payments starting 90 days after a claim is made. With automatic inflation protection to raise the daily benefit 5 percent each year, the annual premium with Hancock for people with a standard health rating would be $1,650 if you buy at age 50, $1,840 if you buy at 55, $2,233 at 60, $2,845 at 65, $4,225 at 70 and $6,560 at 75.
Once you have been assigned the appropriate risk category, your annual premium will not rise, regardless of your claims or deteriorating health, unless your company wins regulatory approval to raise premiums for all its policy holders in your state.
(If you move, the rules in the state where you bought the policy apply.)
In buying a policy, you can choose almost any number of years — or a lifetime — of benefits and raise or lower the daily dollar amount or the waiting period before benefits begin. Inflation protection against rising costs of care can be on either a simple or a compound basis — or you can choose to do without it.
Premiums, which generally rise 8 or 9 percent for each year you wait to apply, also depend on which of three main health-related risk categories — preferred, standard or substandard — you are assigned. The preferred, or good-health, designation typically saves 10 to 20 percent.
The average age of individual buyers is the early 60s; for applicants in their 70s, only one in five qualify for good-health discounts and two-fifths of this age group are denied coverage at any price, according to the American Association for Long-Term Care Insurance.
Premiums are also governed by other considerations, like whether you are married and, if you are, whether your spouse is also applying for a policy.
Married people — and in some cases committed partners or even siblings — are entitled to discounts of 15 to 40 percent because they have a presumed care provider living with them, thereby reducing the cost or likelihood of claims. There is also, in effect, a volume discount for the second policy.
If a couple can afford only one policy, said Dee Balliett, a partner at Balliett Financial Services in Winter Park, Fla., it may be a good idea to buy coverage on the healthier, younger person. If a husband is older than his wife and he has the only policy, for example, his wife may be left with no one to care for her after his death — and without insurance.
Long-term care policies also take time to buy — usually several weeks, while the company evaluates statements you have made about your health, perhaps checking them with your doctor. You may also be subject to an interview, probably by telephone, in which the company gauges your mental acuity.
The questioner may ask you to name as many fruits or vegetables as you can, for example, or to perform simple arithmetic calculations. Insurers pay particular attention to signs of memory loss, which can hint at many years of claims by people in good physical health.
“It’s the cognitive claim that terrifies” the companies, Mr. Slome said. “Insurers are less concerned about disease and conditions that will kill somebody than those that will allow them to live for many years.”
Healthy buyers should welcome such checking, even if it involves answering questions that a 4-year-old could handle, because it suggests that their premiums won’t be subsidizing poor risks, a situation that makes experts wary of some group plans.
You can generally reduce coverage, and premiums, at any time — but you cannot raise coverage without making a fresh application.
Although each policy contains a customized mix of options, the industry has standardized much of the contract language, helping to make policy premiums eligible for tax breaks. For example, for you to collect benefits, you must be unable under federal law to perform two or three of six “activities of daily living” without substantial assistance. These “triggers” involve bathing, dressing, eating, going to the toilet, continence and basic mobility.
Specialists recommend that the policy specify that this determination be made not by the company, but by your own licensed health care practitioner (not necessarily a doctor).
Last year, 36.5 percent of claims paid by eight top long-term insurers were for nursing home care, 33.9 percent for care in the home and 29.6 percent for assisted-living costs.
While women use long-term care for an average 3.7 years, compared with 2.2 years for men — and are also more likely to be without a spouse — Mr. Slome considers a policy that pays for three years a good, middle-of-the-road choice for most people. Only 8 percent of claimants exhaust benefits in that time, the association has found. (You may stop and restart claims as your health permits.)
BENEFITS can be paid under three methods. The main one these days is called reimbursement, with the company paying either you or your provider only when you receive services it deems eligible. The other methods are indemnity, under which the insurer pays a set amount directly to you so long as you obtain some care, and disability, under which you get a full benefit if you are eligible, whether or not you choose to use any services.
Insurance specialists warn that one of the most costly mistakes made by buyers, particularly those under 70, is shunning inflation protection in order to minimize their premiums.
Another major error, Mr. Killiany said, is trying to save money by not taking a full benefit for home care on the assumption that such care will always cost less than care in an institution. But dealing with progressive illness at home, with individualized nursing care, can be far more expensive than it is in a nursing home.
While long-term care insurance can be expensive, careful choices of coverage and deductibles, along with the possible tax breaks, can make it more accessible. You can deduct premiums from federal income taxes to the extent that they and other medically related expenses exceed 71/2 percent of adjusted gross income. And 37 states now offer deductions or credits for long-term care insurance premiums. (New York and New Jersey are among them; Virginia’s deduction begins for 2007.) And premiums can be up to 100 percent deductible for businesses.
Moreover, you can save as much as 8 percent or so by paying premiums annually instead of monthly or quarterly.
Nonetheless, this coverage is not for everyone, experts caution — and certainly not for those who can ill afford the premiums.
“I don’t put long-term care at the top of the list” for sound old-age financial planning unless you have significant assets and want to leave an inheritance, said Ms. Balliett in Florida. “But if that’s your choice, then you better get it.”
Disability Insurance : Sadly the insurance that is often overlooked
By Hillary Churra NY Times Article : June 30, 2007
It took just 17 days for Cindy Wrenn to realize that her disability insurance premium was not just another drain on her checking account. One-third of American workers are likely to be disabled for an extended period, and she became one of them when she had a stroke and brain aneurysm at age 28.
Mrs. Wrenn signed up for her long-term disability insurance policy in February 2002, as a supplement to the one she had through her job as a licensed title agent. After her medical emergency, the policies paid 70 percent of her salary for the six months it took her to get back to work full time.
“We thought we were too young to have an illness and were pretty secure in our jobs,” said Mrs. Wrenn, of Knoxville, Md. “It wasn’t an outrageous premium, so we did it. Because of disability insurance, we got to follow through with the purchase of our house, and that is where we are living today.”
Disability insurance provides partial income replacement so that if someone becomes disabled, they need not dive into savings, sell a home or radically change how they live. Working people are more likely to become disabled than they are to die prematurely, even though twice as many people have life insurance as have disability coverage, according to industry statistics.
According to the Department of Housing and Urban Development, illness is a major factor in home foreclosures.
About one-third of 20-year-old workers today will become disabled before they hit retirement age at 67, according to the Social Security Administration. And the primary cause of disability is chronic disease — cardiovascular, musculoskeletal problems and cancer are leading diagnoses — rather than work-related mishaps or nonworkplace accidents, according to a 2007 study for the Life and Health Insurance Foundation for Education, a nonprofit organization that informs the public about insurance needs.
While job-related expenses decrease if someone cannot work, other expenses can soar, especially if homes must be altered to accommodate a disability, said Craig Sampson, a lawyer in Richmond, Va. He bought disability insurance in 1999 when he was self-employed. He pays about $800 a year for $30,000 in coverage.
“Being disabled, you can go down the financial tubes fairly quickly,” he said. “Not only do you have regular living expenses you are unable to meet, but you have other expenses and all the uncovered medical bills. There’s a lot of stuff health insurance doesn’t cover.”
Tammy Brown of Bradford, Ark., signed up for short-term and long-term disability insurance after she started working for Wal-Mart Stores when she was 17. Fifteen years later, in December 2004, when she was 32, she learned that she had amyotrophic lateral sclerosis, or Lou Gehrig’s disease, and was told she had two to five years to live. She took the summer of 2005 off to spend time with her children, then 6 and 9, and received short-term disability. She went back to work in a wheelchair for about a year, then left on long-term disability in 2006. She receives about half of her salary now.
“Without disability, we would’ve lost our home, our vehicle,” Mrs. Brown, now 34, said. “We probably would’ve had to move in with my in-laws.”
The family bought a handicapped-accessible van and installed a handicapped lavatory complete with roll-in shower and rails around the toilet as well as two ramps to the house and a lift to help move Mrs. Brown around the home. Now unable to use her hands or arms to any degree or walk, she needs 24-hour care, either from relatives or someone they pay.
“As I look back on it, I don’t know what we’d have done without it,” Mrs. Brown said. “I never thought I’d ever use it. I thought I’d be working at Wal-Mart until I was 60 or 70.”
There are two major types of disability insurance. Short-term coverage, often offered by employers, covers the first part of a disability and may provide income for a week up to a year or two, depending on the policy.
Long-term insurance starts after short-term coverage ends and helps replace income for a predetermined period, usually two or five years or when the disabled person retires. It can be offered through work — though usually not free —as well as through private policies.
Even those with a policy through work should consider buying private coverage, as an employer’s policy may be bare-bones, could take a while to begin and will not continue when the employee changes jobs. It may also exclude pre-existing health problems.
About 42 percent of full-time workers have no short- or long-term disability, according to Michael Fradkin, vice president for disability product management for the Metropolitan Life Insurance Company. Specialists agree that if you can afford only one type of disability insurance, buy long-term coverage since being without an income for several months would be a burden but being without an income ever again could be devastating.
Because independent disability insurance tends to be expensive — and becomes more so as people age — specialists urge workers to buy it as soon as they start working so they can lock in lower rates. Besides, young workers often have not yet developed health problems that will hinder coverage later.
Mr. Fradkin said many employers offer disability policies, but some have been shifting costs to employees. At the same time, insurers are changing policies to make benefits less generous. They also are becoming more selective in who is granted a private policy.
The policy should replace at least 60 percent of take-home salary and ideally up to 80 percent, if that level of coverage is affordable. Disability insurance will not cover the whole salary for fear that there would be no incentive to work if the entire paycheck could be collected for staying home.
Before purchasing an individual long-term disability policy, it is best to figure out monthly expenses as well as any income from employers, investments or the government. Realize, however, that Social Security payments tend to be minimal, have a five-month waiting period and apply only if someone cannot do any job. Payouts through work policies are subject to taxes, while benefits through independent coverage are tax free.
Bruce Block, a disability specialist with Jenkins Block & Associates in Baltimore, said few people really understood their coverage. Plans vary. Some pay if someone is unable to work in her own professions; others pay if a person cannot do any job, Mr. Block said. Some offer a combination. Others provide coverage for only a few years, some until Social Security begins.
Premiums vary depending on age, sex, income, health, whether a person smokes, what type of job they have and the exclusions they accept. Generally a young nonsmoking accountant who would not need a payout for two years would pay a smaller premium than a chain-smoking construction worker who would want immediate disbursements.
Cara J. Lovenson, an insurance broker and employee benefits consultant in New York City, said she recently sold a policy to a 45-year-old man in relatively good health who is paid about $200,000 a year. She said the policy cost him about $2,800 a year, covered 80 percent of his salary and started payments after 90 days.
Mrs. Wrenn said that when she and her husband, Matthew, discuss ways to cut expenses, dropping their disability is never an option.
“I’ll never let it go,” Mrs. Wrenn said, “well, not until I retire.”
Long Term Health Insurance
By Robert D. Hershey Jr. : NY Times Article : February 25 2007
INSURANCE, they say, is one product you can’t buy when you need it most. When it comes to coverage for long-term care, however, a myriad of choices makes even timely buying a daunting process.
Although industry statistics indicate that more than two of three people turning 65 will eventually need such care — which may be provided in a nursing home, assisted-living facility or at home — even deciding whether you should buy long-term care insurance is a challenge.
Then there’s the design of the actual policies, which may be customized for each buyer’s pocketbook and unknowable health future.
“There’s a million different variations and permutations,” said Steve Killiany, a planner and long-term care specialist at the West Financial Group in Bethesda, Md. “There’s the benefit period, the amount of daily benefit, inflation protection, the waiting period” and other considerations like the financial strength of the insurance company.
The popularity of these policies is arising from several factors, including the climbing cost of health care, longer life expectancies, and a desire to avoid relying on family members who may live far away for care. If you’re wealthy enough, of course, there may be little need for this coverage. If you’re poor enough, Medicaid will pick up the bill. Not only is there a huge middle ground between rich and poor, but people differ in their desire to draw down assets instead of passing them along to the next generation.
A couple with $1 million, for example, may want to be sure that they leave a legacy big enough to put a grandchild through college, rather than risk draining all their funds if they need care for a long time. Mr. Killiany generally considers those with assets of $200,000 to $4 million as candidates for long-term care insurance, but other experts shun any upper limit.
“Money is a very touchy subject,” said Jesse R. Slome, executive director of the American Association for Long-Term Care Insurance, an agent trade group based in Westlake Village, Calif. “Some people are unwilling to spend what they’ve accumulated and sometimes kids don’t want them to.”
If you decide to join the eight million Americans who now have long-term care policies, either individually or through employers, an even tougher question may be when to buy.
There is no simple answer, but Mr. Killiany suggests doing so around the age of 50, when you’re relatively young and probably healthy enough to qualify for a modest premium.
You’ll be wise to compare terms of two or three different companies and, if you have the opportunity, a group plan. In general, healthy people do better with individual policies; those in poor health or with a family history of disease, may do better in a group. Industry leaders are companies like John Hancock, MetLife, MassMutual, Prudential and Genworth.
A typical company policy for a 65-year-old buyer might pay benefits of $150 a day for three years — a total of about $164,000 — with payments starting 90 days after a claim is made. With automatic inflation protection to raise the daily benefit 5 percent each year, the annual premium with Hancock for people with a standard health rating would be $1,650 if you buy at age 50, $1,840 if you buy at 55, $2,233 at 60, $2,845 at 65, $4,225 at 70 and $6,560 at 75.
Once you have been assigned the appropriate risk category, your annual premium will not rise, regardless of your claims or deteriorating health, unless your company wins regulatory approval to raise premiums for all its policy holders in your state.
(If you move, the rules in the state where you bought the policy apply.)
In buying a policy, you can choose almost any number of years — or a lifetime — of benefits and raise or lower the daily dollar amount or the waiting period before benefits begin. Inflation protection against rising costs of care can be on either a simple or a compound basis — or you can choose to do without it.
Premiums, which generally rise 8 or 9 percent for each year you wait to apply, also depend on which of three main health-related risk categories — preferred, standard or substandard — you are assigned. The preferred, or good-health, designation typically saves 10 to 20 percent.
The average age of individual buyers is the early 60s; for applicants in their 70s, only one in five qualify for good-health discounts and two-fifths of this age group are denied coverage at any price, according to the American Association for Long-Term Care Insurance.
Premiums are also governed by other considerations, like whether you are married and, if you are, whether your spouse is also applying for a policy.
Married people — and in some cases committed partners or even siblings — are entitled to discounts of 15 to 40 percent because they have a presumed care provider living with them, thereby reducing the cost or likelihood of claims. There is also, in effect, a volume discount for the second policy.
If a couple can afford only one policy, said Dee Balliett, a partner at Balliett Financial Services in Winter Park, Fla., it may be a good idea to buy coverage on the healthier, younger person. If a husband is older than his wife and he has the only policy, for example, his wife may be left with no one to care for her after his death — and without insurance.
Long-term care policies also take time to buy — usually several weeks, while the company evaluates statements you have made about your health, perhaps checking them with your doctor. You may also be subject to an interview, probably by telephone, in which the company gauges your mental acuity.
The questioner may ask you to name as many fruits or vegetables as you can, for example, or to perform simple arithmetic calculations. Insurers pay particular attention to signs of memory loss, which can hint at many years of claims by people in good physical health.
“It’s the cognitive claim that terrifies” the companies, Mr. Slome said. “Insurers are less concerned about disease and conditions that will kill somebody than those that will allow them to live for many years.”
Healthy buyers should welcome such checking, even if it involves answering questions that a 4-year-old could handle, because it suggests that their premiums won’t be subsidizing poor risks, a situation that makes experts wary of some group plans.
You can generally reduce coverage, and premiums, at any time — but you cannot raise coverage without making a fresh application.
Although each policy contains a customized mix of options, the industry has standardized much of the contract language, helping to make policy premiums eligible for tax breaks. For example, for you to collect benefits, you must be unable under federal law to perform two or three of six “activities of daily living” without substantial assistance. These “triggers” involve bathing, dressing, eating, going to the toilet, continence and basic mobility.
Specialists recommend that the policy specify that this determination be made not by the company, but by your own licensed health care practitioner (not necessarily a doctor).
Last year, 36.5 percent of claims paid by eight top long-term insurers were for nursing home care, 33.9 percent for care in the home and 29.6 percent for assisted-living costs.
While women use long-term care for an average 3.7 years, compared with 2.2 years for men — and are also more likely to be without a spouse — Mr. Slome considers a policy that pays for three years a good, middle-of-the-road choice for most people. Only 8 percent of claimants exhaust benefits in that time, the association has found. (You may stop and restart claims as your health permits.)
BENEFITS can be paid under three methods. The main one these days is called reimbursement, with the company paying either you or your provider only when you receive services it deems eligible. The other methods are indemnity, under which the insurer pays a set amount directly to you so long as you obtain some care, and disability, under which you get a full benefit if you are eligible, whether or not you choose to use any services.
Insurance specialists warn that one of the most costly mistakes made by buyers, particularly those under 70, is shunning inflation protection in order to minimize their premiums.
Another major error, Mr. Killiany said, is trying to save money by not taking a full benefit for home care on the assumption that such care will always cost less than care in an institution. But dealing with progressive illness at home, with individualized nursing care, can be far more expensive than it is in a nursing home.
While long-term care insurance can be expensive, careful choices of coverage and deductibles, along with the possible tax breaks, can make it more accessible. You can deduct premiums from federal income taxes to the extent that they and other medically related expenses exceed 71/2 percent of adjusted gross income. And 37 states now offer deductions or credits for long-term care insurance premiums. (New York and New Jersey are among them; Virginia’s deduction begins for 2007.) And premiums can be up to 100 percent deductible for businesses.
Moreover, you can save as much as 8 percent or so by paying premiums annually instead of monthly or quarterly.
Nonetheless, this coverage is not for everyone, experts caution — and certainly not for those who can ill afford the premiums.
“I don’t put long-term care at the top of the list” for sound old-age financial planning unless you have significant assets and want to leave an inheritance, said Ms. Balliett in Florida. “But if that’s your choice, then you better get it.”
Disability Insurance : Sadly the insurance that is often overlooked
By Hillary Churra NY Times Article : June 30, 2007
It took just 17 days for Cindy Wrenn to realize that her disability insurance premium was not just another drain on her checking account. One-third of American workers are likely to be disabled for an extended period, and she became one of them when she had a stroke and brain aneurysm at age 28.
Mrs. Wrenn signed up for her long-term disability insurance policy in February 2002, as a supplement to the one she had through her job as a licensed title agent. After her medical emergency, the policies paid 70 percent of her salary for the six months it took her to get back to work full time.
“We thought we were too young to have an illness and were pretty secure in our jobs,” said Mrs. Wrenn, of Knoxville, Md. “It wasn’t an outrageous premium, so we did it. Because of disability insurance, we got to follow through with the purchase of our house, and that is where we are living today.”
Disability insurance provides partial income replacement so that if someone becomes disabled, they need not dive into savings, sell a home or radically change how they live. Working people are more likely to become disabled than they are to die prematurely, even though twice as many people have life insurance as have disability coverage, according to industry statistics.
According to the Department of Housing and Urban Development, illness is a major factor in home foreclosures.
About one-third of 20-year-old workers today will become disabled before they hit retirement age at 67, according to the Social Security Administration. And the primary cause of disability is chronic disease — cardiovascular, musculoskeletal problems and cancer are leading diagnoses — rather than work-related mishaps or nonworkplace accidents, according to a 2007 study for the Life and Health Insurance Foundation for Education, a nonprofit organization that informs the public about insurance needs.
While job-related expenses decrease if someone cannot work, other expenses can soar, especially if homes must be altered to accommodate a disability, said Craig Sampson, a lawyer in Richmond, Va. He bought disability insurance in 1999 when he was self-employed. He pays about $800 a year for $30,000 in coverage.
“Being disabled, you can go down the financial tubes fairly quickly,” he said. “Not only do you have regular living expenses you are unable to meet, but you have other expenses and all the uncovered medical bills. There’s a lot of stuff health insurance doesn’t cover.”
Tammy Brown of Bradford, Ark., signed up for short-term and long-term disability insurance after she started working for Wal-Mart Stores when she was 17. Fifteen years later, in December 2004, when she was 32, she learned that she had amyotrophic lateral sclerosis, or Lou Gehrig’s disease, and was told she had two to five years to live. She took the summer of 2005 off to spend time with her children, then 6 and 9, and received short-term disability. She went back to work in a wheelchair for about a year, then left on long-term disability in 2006. She receives about half of her salary now.
“Without disability, we would’ve lost our home, our vehicle,” Mrs. Brown, now 34, said. “We probably would’ve had to move in with my in-laws.”
The family bought a handicapped-accessible van and installed a handicapped lavatory complete with roll-in shower and rails around the toilet as well as two ramps to the house and a lift to help move Mrs. Brown around the home. Now unable to use her hands or arms to any degree or walk, she needs 24-hour care, either from relatives or someone they pay.
“As I look back on it, I don’t know what we’d have done without it,” Mrs. Brown said. “I never thought I’d ever use it. I thought I’d be working at Wal-Mart until I was 60 or 70.”
There are two major types of disability insurance. Short-term coverage, often offered by employers, covers the first part of a disability and may provide income for a week up to a year or two, depending on the policy.
Long-term insurance starts after short-term coverage ends and helps replace income for a predetermined period, usually two or five years or when the disabled person retires. It can be offered through work — though usually not free —as well as through private policies.
Even those with a policy through work should consider buying private coverage, as an employer’s policy may be bare-bones, could take a while to begin and will not continue when the employee changes jobs. It may also exclude pre-existing health problems.
About 42 percent of full-time workers have no short- or long-term disability, according to Michael Fradkin, vice president for disability product management for the Metropolitan Life Insurance Company. Specialists agree that if you can afford only one type of disability insurance, buy long-term coverage since being without an income for several months would be a burden but being without an income ever again could be devastating.
Because independent disability insurance tends to be expensive — and becomes more so as people age — specialists urge workers to buy it as soon as they start working so they can lock in lower rates. Besides, young workers often have not yet developed health problems that will hinder coverage later.
Mr. Fradkin said many employers offer disability policies, but some have been shifting costs to employees. At the same time, insurers are changing policies to make benefits less generous. They also are becoming more selective in who is granted a private policy.
The policy should replace at least 60 percent of take-home salary and ideally up to 80 percent, if that level of coverage is affordable. Disability insurance will not cover the whole salary for fear that there would be no incentive to work if the entire paycheck could be collected for staying home.
Before purchasing an individual long-term disability policy, it is best to figure out monthly expenses as well as any income from employers, investments or the government. Realize, however, that Social Security payments tend to be minimal, have a five-month waiting period and apply only if someone cannot do any job. Payouts through work policies are subject to taxes, while benefits through independent coverage are tax free.
Bruce Block, a disability specialist with Jenkins Block & Associates in Baltimore, said few people really understood their coverage. Plans vary. Some pay if someone is unable to work in her own professions; others pay if a person cannot do any job, Mr. Block said. Some offer a combination. Others provide coverage for only a few years, some until Social Security begins.
Premiums vary depending on age, sex, income, health, whether a person smokes, what type of job they have and the exclusions they accept. Generally a young nonsmoking accountant who would not need a payout for two years would pay a smaller premium than a chain-smoking construction worker who would want immediate disbursements.
Cara J. Lovenson, an insurance broker and employee benefits consultant in New York City, said she recently sold a policy to a 45-year-old man in relatively good health who is paid about $200,000 a year. She said the policy cost him about $2,800 a year, covered 80 percent of his salary and started payments after 90 days.
Mrs. Wrenn said that when she and her husband, Matthew, discuss ways to cut expenses, dropping their disability is never an option.
“I’ll never let it go,” Mrs. Wrenn said, “well, not until I retire.”
