What is Disability Insurance?
You’ve protected your house with homeowner’s insurance, your automobile with car insurance, and your medical costs and care with health insurance and long term care insurance. All of these are extremely important for covering some of the unexpected things that life can throw at you.
But have you protected your most valuable asset, your income?
Picture your life after an accident. Living with a disability can alter your world in many respects, including monthly rent or mortgage payments, car payments, groceries, and other expenses in a home. Since most families don’t have even one month’s of living expenses saved up for emergencies, the loss of a wage-earner’s valuable income can dramatically alter life for any family.
According to the Social Security Administration, the odds of a 20 year old becoming disabled were approximately 30% in 2011. Those odds climb over time according to National Underwriter, the likelihood of disability jumps to 43% at age 40.
Importance of Disability Insurance
The good news is that you can protect yourself against that risk. Some people brush off the concept of disability insurance as an unnecessary expense, which couldn’t be further from the truth. Investing a small amount in a modest disability policy can pay off in spades if you do suffer an injury or accident that causes you to miss work.
Rather than fretting about how to make bill payments and rushing back to work before you’re ready, a disability insurance policy steps in and provides a portion of your income (typically after an elimination period- most policies are outfitted with a 90 day elimination period, for example).
You can then take doctor’s orders and work towards rehabilitation and recovery without the added pressure of how to make ends meet. Taking away all of the emotional stress and financial stress will help you to recover quicker and not be forced to go back to work early because of finances. The complete loss of a paycheck can devastate a family in a matter of months. If you could protect that risk for a small amount per month, why wouldn’t you?
How Disability Insurance Works
Before you purchase a disability insurance policy, there are several things that you should know. The biggest thing to know is how much money you would get if you ever have to use your policy. The amount you get will be based on your adjusted gross income and could be tax-free. While each policy coverage is different with different benefits, most will give you around 60% of your income.
Another part of the policy that you need to understand is the elimination period of the policy. The elimination period, or waiting period, is the time that you have to be considered “disabled” before you can start collecting benefits from the policy. These waiting periods are normally anywhere from 30 days all the way to one year.
Another important factor to discuss with the insurance company is what is defined as “disabled” in their terms. Each insurance company is different and has varying requirements on what must be met to receive the insurance benefits. It’s vital that you fully understand their definition of disability. One of the worst things that could happen would be for there to be a serious accident and you not be able to collect any benefit from the policy.
The Cost of Protection
The cost of disability insurance is going to differ case by case. There are several different factors that go into calculating the monthly insurance premiums. One of the biggest things that will impact your costs is your age. The older that you are, the more the insurance policy is going to cost whether it is disability, life or health insurance.
Several other factors are going to impact your policy costs as well, like your occupation, the length of the benefit period, and the elimination period. The riskier that your job is, the more that you’ll pay in monthly premiums. Obviously, the higher the benefit amount, the more that you’ll pay every month. In most cases, disability insurance is much more affordable than applicants think.
The type of policy you get will also change how much you pay for the protection. Each type has its own advantages and disadvantages that you have to weigh. Some of the types include short-term, long-term, guaranteed renewable, and several more. The type of policy that you choose is going to have a huge impact on how much you pay for the coverage.
Don’t Test Fate
Think of it this way: if you’ve spent ten years putting aside 10% of your income into savings, one year of a total disability can obliterate all the hard savings work invested. Some may be thinking that Social Security disability payments are a viable option. The reality is that benefits can only be given after the 5th complete calendar month of a disability- once processing time is factored in, this could mean waiting up to 6 months for the first payment. By the way, the average payment is $1188 per month- is that enough to support your family?
Especially if the family has only one primary breadwinner, disability insurance is a critical stop-gap product that protects your risk and ensures that your family has the financial support to fall back on in a time of need. Don’t leave your future to chance. You never know what tomorrow is going to bring. Disability insurance is one of the best ways to ensure that you and your family will always have the resources you need.
It’s important that you secure all aspects of your life. If there were an accident, and you weren’t able to work for a year, what would you do? How would your family get by? Don’t leave these questions unanswered! Protect your greatest asset- your income- with disability insurance. Call us today!
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