Why Disability Insurance Is Just As Important As Life Insurance

by Hank Coleman

Although most people do not hesitate to buy life insurance for themselves and their immediate family members, statistics show that there is a far greater chance of becoming disabled making you unable to work and earn an income as opposed to living into old age. In fact, one in five workers will become disabled and will not be able to work for a period of time in their careers. Disability insurance is a necessity to hedge against your loss of income. If your family relies on your income to survive, you need to have disability insurance to protect yourself and them.

The consequences of becoming disabled can be particularly devastating if you are a young worker or supporting a family. Nevertheless, people will make sure they buy life insurance coverage but will forego coverage for disability. If you work for someone who provides disability insurance, you should not hesitate to take it as you want some guarantee that the bills will be paid if you cannot work, whether you are laid up short-term or permanently. Ask your employer if they offer more than short-term coverage. The cost is very inexpensive relative to other forms of insurance and the overall peace of mind that it brings.

Young People With Families. Younger workers believe that the likelihood they will become hurt or disabled is remote. So, they only choose life insurance coverage to protect them and their family in the event of their death. But, your income and future income stream is your greatest financial asset. A young college graduate can expect to earn over a million dollars in income over his or her lifetime. Wouldn’t you want to protect that income stream? Would it be worth $50 per month to protect $1 Million? Disability insurance can be more vital to younger people than older workers simply because they take more chances in life than their older cohorts. Both life insurance and disability insurance are important to you and your family whatever your age.

Check The Terms. Like all contracts, read the fine print. If you purchase a separate disability insurance policy, make sure you examine the terms very carefully. Note any exclusions in the policy and the benefit period that is covered as well. Also, determine how the company defines “total disability.” The insurance company which you use should be A-rated and a proven payer when it comes to claims. You can check insurance companies, their health, and their stability at sites such as AM Best and Moody’s.

When Benefits Start To Kick In. Regardless of whether the disability insurance is long term or short term, it will provide an elimination period in its terms. An elimination period is the allotted time someone is given before he can start drawing benefits under the policy. For example, an elimination term for short term disability may be a week for accidents or a couple weeks for an illness. With respect to long term disability, the elimination period is far greater and can be as long as three months. You must ensure that you have enough savings set aside in an emergency fund to get you through the initial phase of your disability to the time you receive your first payment.

How Long Benefits Last. Should you become disabled, you will receive benefits from your policy up until the time the benefit amount is met. In the case of short-term benefits, this period can be anywhere from six weeks up to a couple years. In the case of long term disability, benefits can last for a number of years or until the beneficiary turns, in most instances, 65 years of age.

Working and Collecting Benefits. If you are unable to work as you once did or perform the tasks of your job, you can still collect benefits if you are able to perform certain tasks in another type of job. Of course, for this to occur, you have to choose a policy that is more costly. Therefore, make sure you read the policy over thoroughly so you know exactly what you are getting for the amount of money you spend.

Statistics show that people use disability insurance far more often than any other form of life insurance during their working years. Therefore, it is essential coverage that you need to have. The need is even greater if you are young and/or want to provide for the needs of your family. Your income is your most precious financial asset, and you need to do everything you can to protect it.

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{ 1 comment }

Denise July 28, 2010 at 4:17 pm

Great article. Thanks for sharing

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