Disability Insurance

Buying disability insurance most probably ranks low on your financial to-do list. After all, if you're healthy and you work at a desk job, what are the odds you're going to need it? Well, you might not think of a broken bone, a problem pregnancy or an anxiety condition as disabling, but any of them could keep you out of work temporarily. Statistically, about 30 percent of Americans age 35 to 65 will suffer a disability lasting at least 90 days sometime during their careers.

Disability Insurance is designed to replace a portion of your income when you are unable to work because of injury or illness. It is an insurance product designed to replace anywhere from 50-60% of your gross income on a tax-free basis should a sickness or illness prevent you from earning an income in your job. Every disability insurance policy from every insurance company is very different, this is not a product to simply shop for the most competitive rate.

There are two major types of disability insurance coverage:

Short Term Disability Insurance

Short Term Disability Insurance (STD) pays a percentage of your salary if you become temporarily disabled and are unable to work (excluding on-the-job injuries, which are covered by workers compensation insurance). A typical Short term disability policy will provide you with a weekly portion of your salary, usually between 1/2 to 2/3 of your salary for 3-6 months. and most policies have a "cap," meaning you receive a maximum benefit amount per month.

The Leading causes of Short term disability insurance claims are

• Pregnancy: 29 percent
• Injuries (excluding back): 9 percent
• Back injuries: 8 percent
• Digestive/Intestinal: 8 percent

Long term Disability Insurance

Long Term Disability Insurance picks up where short term disability policy leaves off. Once your STD benefits expire (generally after three to six months), the LTD policy pays you (as with STD policies) a percentage of your salary, usually 1/2 to 2/3 of your current salary.  You then receive benefits until you reach age 65.

The Leading causes of Long Term Disability Insurance claims include

• Cancer: 13 percent
• Pregnancy complications: 12 percent
• Back injuries: 11 percent
• Cardiovascular problems: 9 percent
• Depression: 5 percent

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When you encounter a disability, your life is transformed. Your immediate efforts are channeled into maintaining a reasonable quality of life with the only resources you have available, all while trying to regain your health in order to return to work.

Obviously, your family will also feel the strain both emotionally and financially during this crisis. You must consider their perspective in such a situation as they will undoubtedly have questions and concerns. Are they worried about losing a major source of income?  Are they thinking that they now must contribute financially to your needs?  How will that impact their lives and compromise their goals?

So as a substantial income producer for the household, you have to ask yourself:

• What if I can’t work any longer?
• What can I possibly do to help my financial situation at this time?
• How will the bills be paid?
• What if you are not able to return to work?
• Will my family suffer because they have come to rely on my income?
• Will I have to liquidate our entire savings and/or retirement to carry us through my disability?
• What if your health insurance does not cover any or all of medical bills?
• Who will pay your daily living expenses if your leave off work is longer than you think?
• Do you have enough savings to cover an unforeseen absence?

These are questions that certainly most of us would rather not think about. In assessing these questions, it is clear the answer is long term disability insurance to protect your health, family’s needs, lifestyle and property against risk. 

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