Many people would not think of going without life insurance, and yet, experts place disability insurance right next to or even above life insurance in order of importance. You may not even have heard of disability insurance, indeed many people have only a vague knowledge of it, but experts may be right about its usefulness in your life.
Unlike life insurance which protects the future of a person’s family after they die, disability insurance provides protection for a person, their family, and their income by providing them with a percentage of the monthly income they would normally make but have become unable to work for due to an injury or illness.With the probability of developing a disabling injury or illness being quite high, higher even than a person’s probability of dying, a person obtaining the assurance that they and their family would be able to maintain their lifestyle through disability insurance if they became unable to work for a living is probably worth the premium.
What exactly though, is the probability that you need disability insurance? If you work to make an income so you can support yourself and your family, then the probability is very high. So high in fact, you really cannot afford to be without disability insurance.
There are two types of disability insurance:
Short-Term Disability
This type of disability is frequently provided by an employer. When an individual becomes injured or ill and is covered by short-term disability, they receive an income during the early period of their injury after all sick days have been utilized. Depending on the insurance provider, the individual may receive disability benefits for 2 weeks or up to 2 years.
Long-Term Disability
Long-term disability may be offered by an employer or purchased separately by an individual. This type of disability replaces income during an extended period of time, normally for 2 years, 5 years, or until the disabled recipient turns 65. There are two types of long-term insurance available to individual consumers:
– Non-cancelable long-term disability: Under this type of long-term disability coverage, the recipient has the assurance that their premium (monthly cost of insurance), will never be raised, and, that their policy (the insurance contract) cannot be cancelled as long as it is being paid on time;
– Guaranteed renewable long-term disability:This type of policy, usually less expensive initially, allows the premium to be raised, but only if it affects a class of policy-holders.
Some financial planning experts suggest that if you have enough savings to get you through a maximum period of 6 months without work or income, you may not need to purchase short-term disability coverage. However, you never know when an initially short-term illness can turn into a disability; therefore long-term disability is something you do not want to be caught without.
When considering your probable need for disability insurance, consider these common misconceptions:
“I’m too young to need disability insurance”.
Your probability of needing disability insurance increases as you age and become more susceptible to debilitating injury or illness. Because of this, it is important to obtain disability insurance coverage early, as insurance premiums increase with your age.
“My odds of developing a disability are small.”
In reality, your odds of developing a disability or illness that could keep you from work are greater than your odds of dying. A cold that turns into pneumonia, recurring back pain, cancer, loss of limb use, and loss of eyesight are all fairly common occurrences. Those working in conditions that carry associated hazards have a very high risk of developing a disability, although they may have a more difficult time obtaining disability insurance.
“I have a safe job.”
Regardless of the safety level of your job, illness, injury, or a disability can happen at any time. Consider these disability insurance claims:
ProfessionAgeDisability/Illness
Accountant58Pancreatic cancer
Attorney40Pregnancy
Dentist 50Fractured clavicle
Executive42Psychotic conditions
Physician obstetrics62Lower back pain/strain
Physician56Leukemia
Sales 33Traumatic brain injury
“If I need it, I can always buy disability insurance later.”
Actually, no, you cannot. If you suddenly develop a disability, injury, or illness and are not able to work, you cannot purchase disability insurance. If you want your income to be protected at the event a disability renders you unable to work, you must have obtained that insurance before becoming disabled.
If you were to dig a little deeper, you could probably find startling statistics on the number of people who become out of work due to a disability. The bottom line is that procuring disability insurance is a precaution worth taking, especially because you’ll probably need it.