Disability insurance is the Rodney Dangerfield of financial planning and risk management landscapes. Long-term disability is an essential part of a good financial plan, and helps prevent against one of the most common tragic events we face today: going out on long-term disability. Most people think of becoming disabled as something in the distant *darkened, shadowed* future that unlikely to happen soon however many different circumstances cause for disability and needing a safety net is certainly essential. Disability insurance covers up to of your income if in the event you cannot work whether it be due to a long-term disability (LTD) or short term disability (STD).
The importance of disability insurance cannot be overemphasized. According to research, 1 in four of all eligible starting work adults will have some form a disability by the time they reach retirement age. The danger is real, and if you cannot go to work, the economic consequences can be catastrophic. For most us, our income pays for everything from where we live to what we eat and if it is lost due to disability even temporary can be disastrous. Disability insurance fills this hole by providing security that you can pay the bills, mortgage and other necessary expenses.
The two primary forms of disability insurance are short-term and long-term coverage. A short-term disability insurance plan can last however long from a two months to one year. This is designed to replace your income for a period of time when you cannot work due to illness or injury. Then, long-term disability insurance follows after the short term policy expires and extends over a longer period of time (up to many years or even until retirement age) as specified in your individual plan. While each serves its own important function, anyone interested in security for the (very) long term must have a solid policy to protect against longevity risk.
Disability insurance — what kind of coverage is that? Benefits, waiting periods and definitions of disability may differ greatly from policy to policy. Many policies include an “own occupation” clause, which means you can collect benefits if you cannot do your individual job duties—not necessarily any job—even though another work might be with reachable range. Other policies provide ‘any occupation’ coverage, meaning you must not be able to work in any given job at all. With the former typically being more costly, but potentially offering less income protection in the event of a disability These differences are important to understand when it comes to choosing a policy that fits your situation.
The same factors apply to disability insurance quotes, as your premium could fluctuate substantially depending on the type of policy you want and how much coverage you buy. In general, the shorter your age and of good health, it will lower premiums. You will want to hop around and shop the different policies you can find, that gives you plenty coverage for a decent price. Disability insurance is an investment in your future so that if something bad happens you and can be protected financially when the time comes.
Disability insurance does have a level of coverage — usually basic based on the definition associated with it, but then typically there are optional riders or add-ons that can be built into your policy. An example of this is a cost-of-living adjustment (COLA) rider that bumps your benefits up every year to account for inflation. For example a residual disability rider provides partial benefits due to you still able working part time or at higher level do too injury. By assessing these alternatives, you may optimize your coverage to better match the specifics of your unique situation and deliver a more complete shield.
Disability insurance is frequently neglected or dismissed by many people as a form of protection; some believe it to be covered by other insurances like health and life. Despite this, when you become sick the health insurance provides a replacement for medical expenses but not income. It’s the same with life insurance, the benefit is not there to cover you when you are alive but unable to work; it’s supposed to be a payout for those who depend on your income. This is where disability insurance comes in, providing a safety net to make sure you remain financially stable.
Many employers include disability insurance in employee benefits packages, but these plans may not be all that comprehensive. Review your employer handbook for its policy and what is viewed as appropriate or inappropriate. Often, it makes sense to fill in employer-based coverage with an individual policy that provides exactly the protection you need for your home.
The bottom line is that disability insurance should be a cornerstone of any financial plan, offering critical earnings protection for when your situation changes and you can no longer work due to illness or injury. Disability comes with huge risks: for one, the monetary expense of losing your earning potential can be catastrophic. Disability insurance is an investment that protects your finances, allowing you to support yourself and maintain the lifestyle for which you worked so hard in the event of unforeseen hardships. Like all other financial decision, go over your options and get knowledgeable on the terms of your policy so you can make an informed choice based on what will work for you. That way, you can handle all of the unpredictable things in life with as much confidence and comfort possible.
