Disability Insurance

Disability Insurance

Disability income protection insurance is often the most overlooked insurance coverage. A disabling illness or injury is much more likely than dying prematurely (1 in 4 chance at age 20 of a disability before age 651 ), yet this piece is missing from many financial plans. We know the disability insurance market and can find the right insurance carrier and policy for your particular occupation.

When totalling up your income throughout your working career, it will probably be your biggest asset. Without it, your ability to meet financial obligations is nearly impossible.

So, why the disconnect? Consider the myths and facts presented below:

MYTH: “It won’t happen to me. I work behind a desk all day.”

FACT: Less than 5% of disabling accidents and illnesses are work related. And injuries accounted for only about 10% of disability claims2.

MYTH: “I have disability coverage at work. I think it covers 60% of my income.”

FACT: Then you are one of the roughly 32 million working Americans with this coverage at your employer. The big questions are whether the employer-provided coverage is enough, and if it is taxable or tax-free. 60% coverage may end up being considerably less after-tax. Could you live on 43% of your income? Individually-owned long term disability insurance can fill the gaps that a group plan does not, and on an income tax-free basis.

MYTH: “The federal government will pay me Social Security disability benefits.”

FACT: The average Social Security disability benefit received in 2018 was $1,198/mo.4 Will this support your family?

MYTH: “I’ll use my savings to get me through a disability.”

FACT: Even though 68% of adult Americans have zero earmarked for emergencies3, assume you are part of the 32% that have prepared for this. How long could you cover your normal living expenses with your savings? When would the money run out? Would you be able to save for your retirement? Would you be able to save for a vacation?

The big take-aways:

  • About 90% of disabilities are caused by illnesses, rather than accidents.
  • A disabling injury or illness that lasts more than a few months could devastate your finances in the short and long-term.
  • Relying on Social Security disability payments could leave you short handed.
  • Employer-sponsored disability plans may not be sufficient for your specific situation.

A great resource for additional information is at www.disabilitycanhappen.org.

1. U.S. Social Security Administration - Fact Sheet - February 2013
2. Council for Disability Awareness - Long-Term Disability Claims Review - 2012
3. U.S. Federal Reserve Board - Survey of Consumer Finances - 2010
4. U.S Social Security Administration - Selected Data From Social Security's Disability Program

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