Most people have insurance for their home and car and have at least considered getting life insurance to protect their loved ones from the financial consequences of their death. However, many people haven’t thought at all about protecting their ability to earn a living.
Here are some sobering statistics collected by the Council for Disability Awareness: [i]
- Over one in four of today’s 20-year-olds will become disabled before they retire.
- One in eight workers will be disabled for five years or more during their careers.
- The average individual disability claim lasts 31.6 months.
Though your individual risk of disability varies greatly depending on factors like your occupation and health, it’s important to consider how a disability would affect your financial picture. Can your finances survive the loss of nearly three years of income? Though Social Security provides some benefits to disabled workers, the average monthly benefit in April 2015 was $1,016.88.[ii] Can your family live on that much? The hard truth is that most families cannot financially withstand the loss of too many months of income, even when they have significant emergency savings.
Disability income insurance can help you protect your ability to earn an income. Many employers offer group disability income insurance as part of employee benefit packages. The major advantage of these policies is that they are typically quite affordable. However, it’s critical that you check the terms and schedule of benefits carefully because it’s likely that the policy will reduce the payout to something like 60% of your paycheck and limit the number of months you can collect a disability payment.
You can also consider getting an individual disability income insurance policy that is based around your personal health situation and financial needs. Though these policies may be more expensive than what’s available through your employer, shopping around can give you many more options such as coverage for special skilled work, portability, and riders that guarantee your ability to purchase additional coverage if your income increases. A third option is to get a supplemental disability policy that will tack on extra coverage on top of the group policy offered by your employer.
Another thing to consider is whether you should get short-term disability insurance to cover you in case of an illness or injury. For example, recovering from surgery might take several weeks or months in which you’re not earning an income. A short-term disability policy would replace a fixed percentage of your income for the period of your recovery. Short-term coverage can also be a good way to bridge the gap until a long-term policy kicks in.
There are many options out there for disability income insurance and it’s important to read the terms and coverage guidelines to be sure that you understand exactly what a policy offers. If you have questions about whether disability income insurance is right for your needs, please call our office at (518) 581-1642.
Maureen Hallaran, NSSA
& Steve Kamen, NSSA