Married couple Terry and Marissa visited their nephew at a local hospital, where he was being treated for injuries he suffered in an auto accident. The experience got them thinking about how they'd cope financially if one of them were disabled for a long period.

Marissa's employer offered some coverage, but they doubted it would be sufficient. Terry was self-employed and had health problems. So he didn't have long-term disability coverage and would have to pay high premiums to get it. With all of this in mind, the couple sat down with their financial adviser to discuss buying some extra coverage for Marissa.


the coverage

Their adviser agreed that it's a good idea for anyone whose biggest asset is his or her ability to earn income to consider LTD coverage. In a nutshell, it's an income replacement program that provides either a flat amount or, more typically, a percentage of the insured person's gross monthly salary should an illness or injury prevent him or her from working for more than a designated number of consecutive days.

The couple's adviser also noted that, though Marissa had some coverage through her job, buying a separate policy would ensure policy portability and let them decide precisely how much coverage they needed. Plus, the financial benefits from the extra LTD insurance would be income-tax-free -- benefits from her employer-provided policy, on the other hand, would be taxable, because her employer, rather than Marissa, was paying those premiums.

Selecting the

right policy

The biggest hurdle to obtaining an LTD policy, the adviser cautioned, would be cost. One way Terry and Marissa could save money would be to look for a policy with a longer waiting period. For instance, if the couple could afford to wait six months to start receiving the benefits, such a policy would cost less than one that kicked in after only one month.

Beyond cost, or perhaps even before it, they should carefully read how each prospective policy defines "disability." A simple rule of thumb: the broader the definition, the better.

The couple also should consider obtaining the highest monthly benefits for which Marissa could qualify. Doing so might entail buying additional coverage or policy riders, which, naturally, would drive up the total cost. Still, the added security of maximized benefits could be worth it.

Doing the research

After doing the research and consulting with their financial adviser about their top picks, Terry and Marissa did buy an LTD policy. Fortunately, they've yet to put it to use. But they feel much more financially secure having the policy in place.

Norm Grill is a certified public accountant and managing partner of Grill & Partners LLC, accountants and consultants to closely held companies and high-net-worth individuals, with offices in Fairfield and Greenwich. He can be reached at: