Are you one of the millions of Americans living paycheck-to-paycheck? Don’t be embarrassed; most are! An accident or unexpected illness that leaves you unable to work and unable to pay for your living expenses. This results in financial devastation. For this reason alone, disability insurance is essential insurance coverage. Unfortunately, far too many people don’t have enough, if any, disability coverage to protect them from the above. You need to protect your power to earn money; the easiest way is through a disability insurance policy.
Cost is one commonly cited reason for the lack of disability coverage, and this is especially true for those employed in a high-risk occupations. Other factors impacting rates include the benefits selected, age, and personal health history. However, considering the protection provided by disability insurance, a premium amounting to 3% or less of your income is a relatively small investment. You might have many other tangible areas to spend that 1-3% of your income now, but how would you financially survive should you become unable to work in the future?
Why am I getting less?
Most experts agree that adequate coverage starts with a policy providing 60% of your gross income when you’re disabled. The reasoning being is disability insurance premiums are typically paid using post-tax dollars, meaning the benefits are tax-free. So, a policy that provides 60% of your pre-tax income would amount to your existing paycheck. If you are still confused, don’t hesitate to contact us.
Design Your Disability Plan
The waiting period of a policy is a significant factor when it comes to policy rates. Premiums are usually significantly lower if you can afford to wait 90 days after becoming disabled to begin collecting benefits. You’ll need personal savings to cover your expenses while waiting for the benefits to start. The maximum benefit period is another major factor affecting the policy rate. Purchasing a policy that only offers benefits for a couple of years versus until you’re retired can lower the rate. However, you should expect sufficient retirement income to provide coverage at the end of the maximum benefit period.
Regarding disability policies, you should consider how the policy defines disability. Some policies are designed to only deliver in the event of a total disability and inability to work any job. Partial disability protection is an important feature, and it’s intended to pay the lost percentage of your income if you can only during your disability.
You should further determine if the policy is guaranteed renewable and non-cancellable. With these features, the policy can’t be canceled, and the premium can’t be raised should your health change during the coverage. It’s essential to ensure the policy has an inflation rider that provides a cost of living adjustment for the disability period. A future insurability rider is another option to consider. This feature will permit you to buy additional coverage (regardless of any occupational, activity, or health status change) should your income increase. Some carriers may also have an option for transition benefits that will pay a portion of any income loss you might incur when returning to work after a period of disability.
What to do Now
Let’s discuss your disability needs and protect your income and your ability to take care of living expenses.