Your ability to earn an income is your greatest resource. If not for your paycheck, you would not be able to put food on the table, clothes on your back, or a roof over your head. However, have you ever considered what would happen if you suddenly were unable to work due to an illness or injury? How will you replace your income? According to a survey from Life Happens, “Half of working Americans couldn’t make it a month before financial difficulties would set in, and almost one in four would have problems immediately”. This why it is important to have disability insurance.
Disability Insurance is protection for your paycheck. It will cover part of your salary if you become disabled and will end when you return to work. There are two types of disability coverages offered. The first is short-term and will usually cover the first three months of a disability. The second is long-term. Long-Term Disability Insurance kicks in after six months. Long-term disability coverage usually lasts for two, five or 10 years, or until age 65 or 67, depending on the policy. Disability Insurance can usually be gotten through work as an employee benefit, but it can also be obtained through an insurance company offering this coverage. Insurance purchased through a company generally replaces 40 percent to 60 percent of your income. About 60 percent of your income is typically paid to you if you get coverage through work.
When it comes to who should get disability insurance, the answer is clear: Anyone who earns a paycheck should get a policy. Consider this statement from the article, Disability Insurance: Learn Why You Need It. “According to the Council for Disability Awareness (CDA), more than one in four people in their 20s will probably become disabled before retiring. The council adds that one in eight workers can expect to be disabled for five years or more before retirement.”* Furthermore, a 25-year-old worker who makes $50,000 a year and suffers a permanent disability could lose $3.8 million in future earnings. Are you prepared to take this risk with your or your family’s well being?
You insure your home, your car, and your life. Why not insure your paycheck? Check with your company’s benefits office to obtain information on the coverage offered. Then, take this information to an advisor who can educate you on the coverage and determine if it is the right amount for you. If your employer does not offer disability insurance, discuss your coverage needs with an advisor and find out what options are available that will meet your budget.
Matt Dressel is the Owner of the Independent Financial Solutions Group, a Registered Investment Advisor. He is an Investment Advisor, Life Insurance Agent and does Financial Planning. If you have any questions about this article, he can be reached at 252-515-0242 or matthewdressel.ifsg@gmail.com.
(Disability Insurance Benefits could be subject to the claims-paying ability of the Insurance Company.)
Sources:
LIFE Happens.org
