Disability Insurance

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Disability Insurance

We insure our cars. Also, we insure our homes. Yet, we don’t think to insure the income that allows us to pay for these things. It is important to consider what we would do if we suddenly became unable to work. Ask yourself how long you could survive without a paycheck. For most people, the answer is not long. Even people with savings should be careful about draining this resource. You want to keep savings when unemployed, because you don’t know what the future holds. The best way to lessen the burden of the unexpected is to buy disability insurance.

What Is Disability Insurance?

If you become unable to work for a long period of time due to illness or injury, what would you do? Disability insurance provides you with a percent of your income during that time so you can survive. Think of it as a safeguard against the hardship of unemployment.

Why Do I Need It?

People tend to think that the probability of having a serious injury or illness is small. They don’t think about having to miss months or even years of work. It is easy to think we will be the lucky ones who avoid such problems. Unfortunately, it happens more than we think and to those we would never expect.

Statistics

In 2017, over 2 million people filed for disability with the Social Security Administration. Only about 35% of those applications turned into awards. That results in more than a million people unable to work and without a substitute for their income. Workers from age 18 to 39 account for a high amount of these victims of circumstance.

Different Types of Disability Insurance

There are 2 different types of disability insurance: short-term and long-term. Generally, short-term coverage will provide a payout for a few months up to a year. The amount will be roughly 60-70% of your salary. Roughly, the waiting period to begin receiving the benefit is about 2 weeks after you become disabled. With long-term coverage, benefits will last the duration of your disability. On the downside, the amount is only about 40-60% of your income. Additionally, the waiting period is longer and can take several months.

How Do I Get Disability Insurance?

Well, the easiest way is to sign up for a policy that your employer provides. Many companies offer to pay the entire or a large amount of the cost. Even if they don’t, they will most likely give you the option to buy it at a group rate. If these options are not available to you, you can buy an individual plan. This allows you more control over the type of coverage you secure. Choose a policy that fits your needs and make sure the coverage is continual.

Remember, employers can choose to suspend the offering or you could be uncovered while switching jobs. The best benefit of getting your own policy is that you will be able to receive the payout tax-free. Benefits from a policy paid for by your employer will be taxed, lowering the amount you collect.

Factors to Consider When Buying Disability Insurance

On average, the yearly cost of a long-term policy spans 1% to 3% of your annual income. Of course, this varies based on many factors. Some things that might increase the cost are old age, poor health, smoking, a high-risk job, and gender. Women generally face higher costs because they apply for disability more often.

Payouts for a longer period of time means higher premiums. And, naturally, if your income is higher, the benefits will be higher. When the benefits are higher, so is the cost of the coverage. Also, make sure that you pay attention to how the policy defines disability. Hence, you will know what injuries and illnesses will be covered.

Start the process today by getting quotes so you can compare prices and select the policy that is best for you. Don’t go another day without knowing you are covered if something should leave you incapable of working. Your ability to earn an income is worth more than you think.

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2 Comments

  1. Wilford Horvitz on February 23, 2019 at 5:24 pm

    very interesting topic, great post.

    • Steve on February 24, 2019 at 7:18 am

      Thank you

      Steve

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