1. "Your greatest asset is your paycheck. Disability insurance protects you and your family if you are unable to work by providing income which will help pay your bills and take care of your family. It's just as important as life insurance." - DAVE RAMSEY - DAVE RAMSEY

2. Learning Objectives: Learn what disability and long-term care insurance is Understand who needs disability and long-term care insurance Learn the types of disability and long-term care insurance

3. What do you know about disability insurance? Opening quiz: How much do you know about disability insurance? https://www.metlife.com/individual/insurance/disability- insurance/quiz.html https://www.metlife.com/individual/insurance/disability- insurance/quiz.html

4. Disability insurance: Provides cash income periodically if the insured is physically unable to work. Helps protect your earning power if you are unable to work. The cost of disability insurance depends on amount the coverage is for, the length of the benefits, the length of the waiting period, and the sex and age of the insured. If you count on your job to do things such as pay rent and buy food you should consider disability insurance.

5. Disability Insurance: Many people overlook disability insurance and as a result if they encounter a severe injury or sickness they are not prepared for the loss of wages that occurs, even if they are prepared for the medical costs through health insurance. Keep in mind: During your working years you are more likely to become at least temporarily disabled than to die. About half of all bankruptcies and foreclosures occur as a result of an illness or injury.

6. Disability Insurance: What is a disability? Disability: The exact definition of disability varies from policy to policy. It important to analyze a policy’s definition of disability before you purchase insurance as the definition may affect one’s ability to claim benefits, how long the benefits will last, and how much the policy will cost. Some policies may define disability as the inability of one to be able to do their own job. Other policies may define disability as the inability of the insured to have any job. This definition makes it harder to claim benefits. Policies can also carry exclusions, such as pre-existing conditions, and injuries from dangerous activities. It is important to be aware of and examine any exclusions that may be included in a policy.

7. Disability insurance: How much disability insurance do you need? The amount of disability insurance you are able to purchase is directly related to your income. A standard rule is to purchase no more than 60% to 70% of your gross earnings worth of insurance. This helps to prevent over insurance.

8. Question Cluster 1

9. Sources of disability insurance: Workers Compensation: – Provides wage replacement and medical benefits to those injured on the job in exchange for giving up the right to sue their employer for negligence. Employer Plans: – Often employers may offer their employees types of short or long-term group disability plans of which the employer may pay for part or all of the insurance costs. – Plans vary greatly from employer to employer – Because over 70% of disabling injuries occur off the job this is an employer’s way of protecting their employees. – Subject to taxes

10. Sources of Disability Insurance: Social Security: Only eligible if you are a worker who pays into the social security system. How much you gets depends on your salary and the number of years you put into the system. Only covers a disability that is expected to last 1 year or longer or that will result in death. Benefits will not be paid until the start of the 6th month the person it disabled. Should only be used as a last resort for those who can’t get private coverage, should not be used as a replacement for disability insurance itself. Private Income Insurance Programs: Coverage is provided by privately owned companies. Generally provide about 40-60% of a person’s income. Not subject to taxes Generally more expensive than employer disability coverage

11. Types of disability insurance: Short term: Length of the coverage and payment percent vary from plan to plan. They generally last between 3 months to 1 year, however it can last up to 2 years. Coverage typically starts after all sick leave is exhausted and generally replaces a very high percent of wages in the first payout, and then drops with each additional payment if the policy holder remains unable to work. Long-term: Pays cash income regularly if the insured is physically unable to work for a long period of time. Policies widely vary in length and payout. Some policies may only payout for 5 to 10 years while others may payout to age 65, or even the rest of your life. It kicks in after short term policies stop paying out. This has become an increasingly more important insurance to have, as in recent years advancements in medical care have made many diseases and injuries disabling opposed to deadly.

12. Protection Features: Disability policies have two different protection features: Non-cancelable: The policy can’t be canceled by the insurance company, unless the policyholder fails to pay their premiums. Gives you the right to renew the policy every year without an increase in the premium and no reduction in benefits. Guaranteed renewable: Gives you the right to renew the policy with the same benefits, however the insurer has the right to increase premiums when policy is renewed if it does so for all policyholders in the same class as you.

13. Question Cluster 2

14. Long-term care insurance:  Insurance product that pays for long-term care services if you are unable to perform everyday tasks such as eating, bathing and using the bathroom as a result of a disability, long-term illness, or old age.  One way to think of it is nursing home insurance.  The purpose of purchasing long-term care insurance is to protect your assets if you have to pay for some type of long-term care such as a nursing home, assisted living, or home care.  The costs of long-term care can be extremely costly, with a national average of $6,235 a month in 2010 for nursing home care that’s over $74,000 a year. This results in many outliving their saving if long-term care insurance is not purchased.

15. Who needs long-term care insurance? As lifespans extend, much like they have in recent years, the need for long-term care continues to increase. One in three people will end up in a nursing home at some point in their lifetime. The purchase of long-term care insurance is particularly important for those in the middle class. Many people have the misconception that the government will pay for long-term care through programs such as Medicare and Medicaid, however this is only partially true. Medicaid will only pay for your long-term care once you have $2,000 or less in savings. Those who have more than $2,000 in savings must first “spend down” their assets by paying for long term care of out their own pocket before Medicaid kicks in. Once you do become eligible there are a variety of restrictions on where and what types of care the patient is able to receive with this form of coverage.

16. Who needs long-term care Insurance? If you have savings you wish to leave to your family when you pass away, or want to ensure you will not become a financial burden to your children, it is important to purchase long-term care insurance in order to help cover these expenses. Although long-term care insurance is particularly important to those nearing their old age it can be important to anyone at any age. Disabling events (automobile and sporting accidents, strokes, brain tumors, etc.) can lead someone at any age to be in need of long-term care. Roughly 40% of all long term care services are provided to individuals under the age of 65 who need help taking care of themselves as a result of disabling conditions such as diseases, injury, disabilities and mental illness. Therefore long term care insurance should be considered at all ages, even if it seems unlikely you will need in the immediate future.

17. Question Cluster 3

18. When should it be purchased? When should long-term care insurance be purchased? Premiums are based on your age when you apply, therefore the younger you are when you purchase long-term care insurance the cheaper it will be. The annual increases are normally about 2-4% in your 50’s and rise to 6-8% in your 60’s. The number of people declined for long-term care insurance also increases with age, as a result of an increase in health problems. For example: if you are diagnosed with something such as Alzheimer's disease you will most likely be denied coverage.

19. When Should it be Purchased? When purchasing long-term care insurance it is important to make sure you will be able to continue to pay for it and won’t cancel your policy. Although insurance is cheaper when you are younger there is no point in purchasing it until you are sure you will be able to continue to pay for the coverage. If you purchase it at age 45 and can’t afford the policy at age 50 and then get insurance again at age 55, it will be more expensive then when you previously purchased it and the money you spent from age 45 to 50 will seem as though it has gone to waist. As a general rule it is suggested to purchase long-term insurance while in your 50’s before premiums rise too much and before you are likely to be declined as a result of poor health.

20. Types of Long-Term Care Insurance: Indemnity Long-Term Care Insurance: Gives you control on how to manage your benefits. Enables you to get paid out maximum benefits even if that amount was not incurred. Example: Your maximum benefit for the policy is $300 per day in a nursing home, but your bill amount is only $200. The unused $100 is still paid out to the policyholder and can be used for whatever the policyholder wants including bills or even savings. Reimbursement Long-Term Care Insurance: Conventional form. If you do not use the maximum benefit amount your policy is reimbursed for the remaining amount, which can be used for future claims. Example: Your maximum benefit for the policy is $300 per day in a nursing home, but your bill amount is only $200. The unused $100 can then be used for future claims.

21. Types of Long-Term Care Insurance: Partnership Long-Term Care Insurance: Form of collaboration between the state and the insurance company. If you use up your coverage this type of policy allows you to qualify for Medicaid without the usual low asset criteria. Example: You use up your coverage amount for your long-term care policy but you still have $500,000 in assets and are afraid to lose this money. With this type of policy you will still qualify for Medicaid coverage even though you have more than the usual $2,000 or less in assets needed to apply for coverage.

22. Do your Research: When purchasing or considering purchasing long-term care insurance it is important to closely analyze your specific circumstances and the different types and plans available to you so that you are best able to pick the plan for you. It is important to remember when purchasing long-term care insurance that you will likely carry the policy for the rest of your life making this a very important purchases; carefully examine your options and fully research prices.

23. Question Cluster 4