You probably use a variety of strategies to protect yourself from risk. For example, you may have keep an emergency reserve. You may use various types of insurance, such as health insurance, life insurance, homeowners insurance and more. If you’re like many Americans, however, you may not be protected against one significant risk—disability.
According to the Council for Disability Awareness, the average American has a 25 percent chance of becoming disabled at some point in life. However, Americans on average believe they have only a 2 percent chance of becoming disabled.1 Many people don’t protect themselves against disability risk because they believe disability won’t happen to them.
The good news is there are strategies you can take to protect yourself against the financial fallout of disability risk. One option is to use disability insurance, which is often available as a benefit through your employer, but you can also buy it directly through a financial professional.
Not sure how disability insurance works, or whether it’s right for you? Below are answers to a few common questions about disability insurance. If you’re not protected against disability risk, now may be the time to take action.
Is disability covered by Social Security?
You may feel that you don’t need disability insurance because disability is covered by Social Security. It’s true that Social Security does offer benefits for disability. However, many find that Social Security disability benefits aren’t sufficient to meet their needs. That’s because disability benefits are often capped at a maximum amount. If you are a high-earner, that maximum amount may be far less than your lost income.
Disability insurance may be a more effective protection tool, because it could replace a higher portion of your lost income than Social Security benefits.
Hal Hammond in Sarasota says, “The benefits from disability insurance could help you sustain your lifestyle and pay medical expenses if you are unable to work.”
Also, Social Security sometimes has a lengthy approval process. You may not receive Social Security disability benefits until months after you file your application. Disability insurance often starts paying benefits as soon as you become eligible.
Do I need short-term or long-term disability insurance?
There are a broad range of different kinds of disability policies, but most can be classified into one of two groups: short-term disability insurance or long-term disability insurance. You may need both types of coverage to be adequately protected.
Short-term disability insurance generally covers disabilities that last a few months. However, if your disability lasts longer than a few months, it may not be covered by a short-term policy.
Long-term disability insurance, as the name suggests, covers disabilities that last for many months or even several years. Some policies will cover a disability all the way up to your retirement age.
However, many long-term policies have a waiting period before benefits begin. That means a long-term policy may not pay benefits in the first three to six months after a disability happens. If you have both short-term and long-term disability insurance, you can combine the benefits of the two policies to fully protect yourself should you ever become disabled.
How does the insurance company calculate my premiums?
You may have resisted disability insurance in the past because you felt that the coverage would be too costly for you to afford. It is true that disability insurance can sometimes have significant premiums. However, you can often customize your policy to create a protection package that fits within your budget.
Some of the factors considered when calculating your premium amount include your age, your health, your occupation, the policy benefit amount, the length of time the benefit could be paid and more. There are a number of different factors and features you can adjust in the policy to reduce the premium. A financial professional can help you determine which type of coverage is best for you.
Ready to take action against disability risk? Let’s talk about it. Hal Hammond in Sarasota can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
1http://www.disabilitycanhappen.org/chances_disability/
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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