What is the difference between LTCI and LTDI?

Many people wonder if they need Long Term Care Insurance (LTCI) if they have Long Term Disability Insurance (LTDI) through their work or on their own policy.  In reality these policies solve two different problems.  So what is the difference between LTCI and LTDI?

Long Term Disability will replace a portion, normally 60-70% of your pre-disability income if you are not able to work due to an accident or illness.  One of the requirements of these policies is the loss of earned income.  In retirement these policies lose all value since there is no longer earned income to protect.

Long Term Care on the other hand, provides income but only to reimburse for the care that is needed.  Most Long Term Care Insurance policies only allow the money to be used to cover actual care expenses incurred.  The only exception to this is a cash benefit long term care policy.  A Cash LTC plan still requires that the insured need long term care services, but then pays a pre-determined monthly cash benefit that can be used however the insured deems necessary.  Unfortunately, cash LTCI plans have not been sold for a number of years and were also quite a bit more expensive at the time.

But what if you need long term care when you are working?  Does disability help?

Yes and no.  Yes, you will receive a benefit; however, it is only a portion of what your total income was before.  If the disability coverage is provided by your employer then any income you receive is taxed just like your income.  Could you live with a 30-40% pay cut?  That is what it will be if you receive a disability benefit.  One challenging aspect of long term care is that your monthly costs increase as you require home health care in addition to your normal monthly expenses and your income decreases when receiving a disability benefits.  While Long Term Disability is great insurance to protect your income, it doesn’t help with covering the increased expense of needing care at home.

LTC Consumer is an independent, free online service to help consumers understand what long term care insurance is, how it works, and how to evaluate coverage options. Our mission is to provide an educational, no-pressure resource for learning about long term care planning, with the opportunity to speak with specialists who can help them.