The consequences of leaving it out of future planning can be expensive.
As important as disability insurance may be, it is among the most forgotten forms of coverage in a financial plan over the long term.
The importance of homeowners, auto, health, and life policies are far better known.
It is important to recognize, however, that disability insurance is the coverage that you will need if you should ever be forced to leave your work for a period of time due to illness or injury. This is the protection that provides you with the money you need to pay your bills when your earnings have been lost for those reasons.
American government research has indicated that a worker who is twenty years old has a 30 percent chance of experiencing a disability at some point before he or she has reached the age of retirement.
However, only one in three employees have disability insurance in the private industry.
This, according to data from the Bureau of Labor Statistics. Consumer Federation of America insurance actuary, James Hunt, agrees, saying that “It could be argued that the disability of a breadwinner is worse than the death of a breadwinner.” He went on to explain that this is “because the disabled person is still soaking up money.”
Therefore, regardless of whether an individual is inadequately covered by an employer (or not at all) or if that person is self-employed, it is important to make sure that an individual disability insurance policy is purchased.
In the case of an illness or injury that makes a policyholder unable to work, this coverage will typically begin providing checks anywhere from three to six months from the point that the individual is no longer capable of working.
There are three sources of disability insurance coverage:
• Private insurers
• Employers
• The Social Security Administration
The most common mistake made is to think that because you have disability insurance through your employer, then you have all the coverage you need. The trick is to make sure that you can get by on the amount that would be provided by the benefit checks. If not, you may wish to ask your employer if you can pay higher premiums for a larger amount of protection.
