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Long-term disability insurance offers security, peace of mind

In a survey conducted by a trade association, 65 percent of those who responded said they thought most people should have disability insurance. Only 48 percent thought they themselves needed it, though, and only 20 percent actually had it. California residents might do well to incorporate a long-term disability insurance policy as part of a comprehensive long term care plan.

According to a senior partner at a human resources consultancy, long-term disability insurance is a critical safety net issue. Typically, such policies will pay out between 50 and 60 percent of a person's income while he or she is unable to work if disabled due to an injury, illness or accident. Because long-term disability policies often have waiting periods of three to six months, individuals may also want to consider a short-term disability policy to cover that gap.

The payment period for policy payouts varies among different insurers; some will pay out until the policyholder reaches 65 years of age. Individuals who pay for their plans with after-tax dollars will not be taxed on payouts. Many employers have begun to offer long-term disability insurance as a benefit, sometimes covering all or a portion of the policy premiums. According to the trade association, 41 percent of employers offer the plans to their employees, and larger companies are more likely to offer such plans than smaller ones.

A 2015 survey conducted by the Federal Reserve indicated that 53 percent of households don't have savings that could take care of even three months of expenses. Long term care planning is a critical issue, especially for individuals with diminished capacities to earn. An attorney with experience in elder law might be able to help people prepare for these types of contingencies.

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