Playing It Safe

The worst time to discover that you need supplemental insurance is after it’s too late. Five years ago, when Lucinda Andrew’s father, Raymond, was diagnosed with Alzheimer’s disease, her sister and three brothers began holding family talks about options for his long-term care. “We all wanted him to stay at home,” says the 37-year-old Dallas litigator, whose father lived alone in Fort Worth. “But as his health began to decline, he needed round-the-clock professional care.”

The siblings felt that they had three options: an Alzheimer’s facility, assisted living, or a nursing home. But they soon found that the best homes accepted only private insurance or cash, and the cost ranged from $3,000 to $6,000 a month. Her father, a retired Army veteran and postal employee, had Medicare and a pension that “didn’t even cover the least expensive” option. Andrew, who, along with her brothers and sister, agreed to contribute to her father’s care, canvassed locations in person and on the Internet for two years. “This is my dad we’re talking about. We couldn’t just put him anywhere.” In June her father died at home of kidney failure. He was 84.

The struggle to find a good facility that accepted Medicare opened Andrew’s eyes to her own coverage needs. “After going through everything with my dad, I decided to take advantage of the long-term care insurance offered through my employer.”

It’s not the first time Andrew has invested in supplemental insurance — policies that augment major medical and life insurance coverage. In 2001, when she was hired as an associate by the international law firm Jones Day, she enrolled in the disability insurance policies offered by her firm. If she were to become disabled and unable to work, the insurance would provide a portion of her annual income so that she wouldn’t face a financial crisis if she stopped collecting a paycheck.

Before meeting with her employer’s human resources department, Andrew did her homework and learned that the firm’s standard disability policy provides 26 weeks of short-term disability, and she doesn’t have to pay a premium. If necessary, Andrew would be paid full salary for the first 13 weeks and 75% thereafter. That’s excellent coverage, considering that most insurers don’t provide 100% of salary because they want to give employees an incentive to return to work. Playing it safe, she didn’t stop there. She asked herself: What if I can’t work for a year or more?

Currently earning a base salary of $160,000, Andrew says her monthly expenses average $4,000. They include a 10-year mortgage payment of $1,800; a credit card payment of $1,000; and a student loan bill of $600. She lives well within her means but also knows how unpredictable life can be. According to the Northwestern Mutual Life Insurance Co., a year of disability can wipe out 10 years of savings. Andrew signed up to augment the short-term policy with a long-term policy — paying a premium of $47 a month, or $564 annually — that would enable her to receive 60% of her salary