Everyone has reasons for not buying disability income (DI) insurance; below are five of the most common. But do you know the facts?
Reason 1: I can always get coverage in the future.
Fact: True, but people usually develop health problems as they grow older, and premiums increase with age.
Reason 2: My family and friends will support me. Or I will pay my bills with savings.
Fact: While your family and friends would love to help you, are they in a financial position to do so? And do you want to be a burden on someone else? And, unless you’re independently wealthy, your savings will not last long. One year of disability could easily wipe out several years of hard-earned savings.
Reason 3: I have group disability coverage through my job.
Fact: Even if your employer is among the few that’s not cutting back on benefits, group disability insurance typically covers just 60% of gross income, and benefits are usually fully taxable. Can you afford more than a 40% pay cut? Also, what happens if you change jobs?
Reason 4: I cannot afford it. I’ll purchase a policy later when I have the money.
Fact: The average premium is typically only 1 to 3% of your gross earnings. Plus, the longer you wait, the higher your premiums will be. If you cannot afford 1 to 3% of your profits, how will you afford to pay your bills in the event of a disability?
Reason 5: It’ll never happen to me.
Fact: If you’re under age 35, chances are one in three will be disabled for at least six months during your career.1 Also, consider that more people living with disabilities today than would’ve killed them in years past.
Your ability to work and earn an income is your largest asset. Consider the benefits of a disability income policy to help protect your earned income should be a sickness or injury force you out of work.
1 1985 Commissioners’ Individual Disability A Table, Society of Actuaries