Disability insurance is one of those insurance types that you hope and wish that you will never have to use. People don’t give disability insurance much thought. It’s natural when you’re paying for medical insurance, car insurance, home insurance, etc.
But if you give the matter some thought, you will appreciate that disability insurance can help you cover bills when you’re left unable to work because of illness or injury.
Consider the fact that you might need disability insurance. Disabilities can strike without warning. It is easy to not give thought to such contingencies when you’re healthy. Statistics reveal that chances of a disability are higher than those of a premature demise. According to the Social Security Administration, nearly 1 in 4 individuals in their twenties right now will be disabled by the time they reach retirement age.
One in ten Americans is severely disabled. Disabilities can be non-severe and temporary. On an average, a long-term disability claim is for three years. Therefore, when you are weighing options, keep this in mind and don’t overpay for the protection.
Check if you’re already covered for disability to an extent. Worker’s compensation provided by the states is one protection that you could already be availing. Under this, if you are injured or develop an illness traceable to work, then you are eligible for around 66% of your income.
According to the National Safety Council, less than 30% of long term disabilities are related to employment. The majority come from illnesses, and not from accidents.
Social Security is another source of financial relief. You may qualify for disability benefits if you have been contributing to Social Security for long. Keep in mind, even if you’re eligible for these benefits, you will have to fulfill criteria that includes inability to work for a year because of the severity of the disability and also be unable to adjust to other work because of the disability. This program is meant to help only the most severely disabled.
Expenses related to a short-term disability can be met through savings. Money salted away for retirement or a short-term loan can help you meet living and medical expenses from a short-term disability. A Roth IRA lets you withdraw your contributions easily and without the imposition of any penalties.
If you feel that you need further cover, then first check if you can obtain additional coverage through your employer. This will work out to be the most inexpensive alternative. Compare providers online via quotes comparison sites and online brokers.
Know what factors determine the cost of a policy. The waiting period is an important factor. A longer waiting period means a cheaper policy. The waiting period is the time between the disability appearing and when the policy begins paying.
The length of time for which the policy will pay is another factor. If you remember, the average duration for a long-term disability claim is three years. Opting for a policy with benefits extending up to the age of 65 will raise premium costs.
You may choose to cover 60% of the existing salary or income. But if you opt for a lower amount, you will pay less.
Understand how the policy chooses to define “disability”. Normally, people choose a policy that pays upon inability to execute the functions of one’s own profession and occupation. You could choose a cheaper policy; one that pays when your disability prevents you from doing other types of work.
Policies come with additional benefits, but at a cost. Choose sensibly. It is a good idea to opt for inflation protection in the policy. It adjusts payments for a cost-of-living increase to ensure that the benefit amount keeps pace with rise in expenses.
You run your house with the money you earn. If you were to suddenly lose this ability, you’d be out of funds very soon. It makes sense to plan against such a situation.