About post-COVID insurance needs
More than a year after COVID-19 swept across the country, many of you have contacted me to ask about various insurance needs. Here are some of the questions that I have fielded.
Q
Iama 33-yearold woman, who survived the virus and have felt some longer-term effects, like fatigue. Will my COVID diagnosis prevent me from getting life insurance in the future?
A
While you should be able to obtain coverage, it may come at a higher cost. As with any medical condition, the long-term impact of COVID-19 will be incorporated into the insurance underwriting process. “Age and health play a big part in determining life insurance rates, and we’ve seen that play out as insurers have navigated the pandemic this year,” Jennifer Fitzgerald, CEO and cofounder of Policygenius, said in a recent statement.
It is hard to know exactly how much of a premium increase COVID-19 survivors might have to swallow. That said, it makes sense to start the process by applying for term life insurance, which is the most affordable type of coverage. Use an online calculator, like this one from LifeHappens.org, to determine the right amount for your situation.
Q
I am a COVID longhauler, and I am about to collect disability insurance coverage that my employer provides. How will the money I receive be taxed?
A
Disability insurance (DI) is one of those valuable workplace benefits that many workers gloss over, until they actually need it. Yet just over one in four of today’s 20-year-olds will become disabled before reaching age 67 and a whopping two-thirds of the private sector workforce has no longterm disability insurance, according to government data, so consider yourself lucky to have DI!
In broad terms, DI coverage provides income replacement to employees who are unable to work due to illness or accident that is not work-related. Disability coverage comes in two flavors: short-term (STD), typically covers periods lasting less than six months, and long-term (LTD), which lasts for the length of the disability or until retirement. The payout time and amount depends on the individual policy.
Disability insurance benefits have a few caveats, according to the IRS. If your employer pays for all of the premiums for your policy, which it sounds like is the case for you, then you are on the hook for the taxes on the amount received. However, if you pay the entire cost of the insurance plan, then you would not include any amounts you receive for your disability as income on your tax return.
Q
After worrying about my 84-year-old mother’s care in her assisted living facility amid COVID, my wife and I are considering buying long term care policies for ourselves. We are both 61 and work full time but want to make sure that we are not a burden to our kids— and definitely want to stay at home, as long as we can. We had sticker shock when we started doing some research. Is there a way to minimize the cost of long-term care insurance?
AThe Department of Health and Human Services reports that 69% of people will use longterm care services at some point. But the amount of care and the period of time varies dramatically. One in three of today’s 65-year-olds may never need long-term care, but 20% will need it for longer than five years. Additionally, women need care longer (3.7 years) than men (2.2 years).
To reduce premium costs, you may want to consider curtailing your benefit period to five years, rather than pay for lifetime benefits, and you may also reduce the coverage amount so that you can pay for a portion of potential future needs.