How to Look for Disability Insurance, your ability to earn money is one of the most significant assets that you have. Expenses often increase due to disability, while income is drastically reduced. In the event that you’re unable to continue to earn your income because of illness or injury for any period of time, your family’s financial plans could be ruined. The only way to protect yourself and your family from financial disaster is to maintain adequate disability insurance. Disability insurance replaces a portion of your income if you become ill or injured. It’s very expensive because the likelihood that you may need this benefit is relatively high. The risk isn’t something that you likely can bear yourself, so you must transfer the risk to an insurance company.
What is disability insurance?
There are two main types of disability insurance — short-term and long-term coverage. Both replace a portion of your monthly base salary up to a cap, such as $10,000, during disability. Some long-term policies pay for additional services, such as training to return to the workforce.
Who needs disability insurance?
Without disability insurance protection, workers and their dependents are “living on the edge,” at risk of losing their homes and investments. If you need disability insurance, take a look at the details:
Research indicates that one-third of employed Americans will become disabled for at least 90 days at some point in their career. Yet, lack of disability insurance is a common financial error.
The average disability claim lasts almost 13 months and mortgage foreclosures due to disability occur 16 times as often as they do for death. Yet, more than 40 percent of full-time workers do not have coverage in the event of a short- or long-term disability to protect against a loss of income.
What does disability insurance cover?
The definition of disability: The broader the definition of disability, the higher the premium. A policy that covers you if you can’t work in your own occupation but could earn income in a lower-paying job will cost more than a policy that covers you only if you can’t work at all.
Benefits of disability insurance
Disability insurance pays a portion of your income if you can’t work for an extended period because of an illness or injury.
When to drop disability insurance
We recommend getting coverage for at least 5 years or more, to cover long-term loss of income that your 3-6 month emergency fund won’t cover. The only downside to long-term coverage is the elimination period (how long you have to wait before that first check arrives after the doctor confirms you’re disabled).
Cons of disability insurance
• You have to contend with the waiting period. The waiting period is anything between one month to three months. During this period, you will have to dig in your savings and find other sources to provide for the needs of your household.
• The disability insurance payments will only pay for a limited number of months twelve to twenty-four months for short term disability insurance and two to five years for long term disability insurance.
• When you are not the breadwinner and if the other members of your household have enough income to fulfill the needs of the household, then you may not need the disability insurance.
• If your income is near the Social Security benefit amount, then the benefits from Social Security may be enough to cover your lost income. You may not need to shell out premiums for disability insurance. However, it is important to note that you do have to prove conclusively that you are disabled. Social Security will also have limits on your monthly income, which when exceeded, will result in the reductions (or even cessation) of the benefits.
Obtaining as much own-occupation, long-term disability insurance as you can afford makes sense if you have a specialized occupation that would require you to take a significant pay cut in order to work in a different capacity. However, if own-occupation disability insurance is cost prohibitive, having some long-term disability coverage is better than having no coverage at all.
If you currently need all your income to provide your standard of living and achieve your financial goals, you’re going to have trouble making ends meet if you only bring in 60% to 70% of your current income. What typically happens in real life is that people have to make drastic lifestyle changes— unless you obtain as much disability insurance as you can get.
At the Goldsmith Insurance Agency you can rest assured that you are going to get the best policy from a company that will take care of you. If you have any questions through out your search or if there is any way that we can serve you in finding the right coverage, please contact us through the quote form or give us a call at 877-400-0484. We look forward to working with you and getting you insured!