Aug 17, 2023 Do I Need Disability Insurance?

In the US, there are 51 million working adults without disability insurance. Loss of income due to disability is a risk that should not be overlooked. If you lose your income suddenly, are you prepared? Perhaps you could live off your emergency fund for 3-6 months but what about after that? Losing your income with no plan in place can be scary and stressful. This is where disability insurance can be helpful.

What is Disability Insurance?

Disability insurance is intended to replace some of your income if you cannot work due to an injury or illness. Some conditions resulting in disability include arthritis, cancer, diabetes, sight or hearing loss, spinal injuries, broken bones, etc.

The government offers some disability insurance like Social Security, which is hard to qualify for and requires you to work for 10 years. Worker’s compensation is available but only for work-related injury or illness.

You can get policies through your employer if they offer them, or you can purchase an individual policy that suits your needs. While young and healthy, you can qualify and pay lower premiums for a policy. Premiums increase with age and as health fades.

What Kind of Policy Should I Get?

You can get Short-Term or Long-Term Disability or both. Both policies typically cover anywhere from 60-70% of your income. Short-term disability can provide income within a few weeks of your diagnosis and can last up to 2 years, depending on the policy specifics. Long-term disability provides income after two years and can last a certain number of years, until a certain age or until death.

When getting a group policy, your company already lays out many of these factors. Still, if you get an individual plan, you have options regarding coverage and benefits.

What will a Disability Policy Cost?

Like most insurance policies, the cost depends on many factors, including age, health, occupation, and what coverage you are requesting or additional riders. You can get coverage that kicks in when you can no longer perform your own job; this is called ‘Own Occupation,’ or you can get coverage that kicks in when you can no longer perform any job; this is called “Any Occupation’. Generally, the cost ranges from 1-3% of your annual salary.

Where do I get a Disability Policy?

First, look at your employer to determine if they offer disability insurance. If so, you can gather that information and talk to your advisor to see if the coverage is right for you. If your employer doesn’t offer coverage, you will need to talk to an insurance professional. Please reach out to your Leonard Rickey Investment Advisor to talk about what coverage you might need. We do not sell insurance policies but can show you the impact disability can have on your financial future and connect you with an insurance professional.



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