One of the biggest risks you may face is potential disability. If you suffer a long-term disability, you may be unable to work, and you could miss out on months or even years of earnings. That could put in you in a challenging financial position.
Risk protection is the foundation for any financial plan. Without a risk protection strategy in place, you could leave yourself vulnerable to a broad range of risks. It takes only one sizable threat or unexpected event to create a financial crisis and throw your planning off track.
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 you don’t have to leave yourself exposed to this risk. You can protect yourself with disability insurance. Disability insurance 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.
Why do I need disability insurance if I can apply for Social Security disability benefits?
It’s true that Social Security offers benefits for disability. However, those benefits are often capped at a maximum monthly amount. If you’re a high-earner, you may find that the Social Security benefits replace only a portion of your income. Even if you are approved for Social Security, you could still face financial challenges.
Disability insurance may be a better strategy, because it could replace a higher portion of your lost income. The benefits from disability insurance could help you sustain your lifestyle and pay medical expenses if you are unable to work.
What is the difference between short-term and long-term disability coverage?
You may be aware that there are two different types of disability insurance policies: short-term disability insurance and long-term disability insurance. To be adequately protected, most people need both types of coverage.
Short-term disability insurance generally covers disabilities that last several months. However, your short-term disability insurance likely wouldn’t cover your needs if the disability extended beyond that short-term period.
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?
Cost is another reason why some people resist purchasing disability insurance. They believe the insurance will be too costly for them 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? Talk about it with Hal Hammond in Sarasota. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
1http://www.disabilitycanhappen.org/chances_disability/
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