Risk protection is at the foundation of any solid financial plan. It’s difficult to reach your financial goals if you are vulnerable to risk. Without a protection strategy in place, it could only take one emergency to create a financial crisis and throw your planning off track.
If you’re like many Americans, you probably use different forms of insurance to manage your risk exposure. For example, you may have health insurance, life insurance, homeowners insurance and more. However, there could be one risk for which you aren’t sufficiently protected. That risk is disability.
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 think disability won’t happen to them.
The good news is there are steps you can take to protect yourself. One option is to purchase disability insurance, which is often available as a benefit through your employer, but you can also buy it directly through a financial professional.
Not sure whether disability insurance right for you? Wondering how disability insurance works? 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.
Is disability covered by Social Security?
Many people assume that they are covered against disability by Social Security. Thus, they believe they don’t need additional disability protection.
It’s true that Social Security offers disability benefits. However, Social Security disability benefits are often capped, which means that if you are physically unable to work, Social Security may only replace a portion of your lost income.
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.
Also, Social Security sometimes has a lengthy approval process. You may not receive Social Security disability benefits until months after you file your application. Disability insurance often starts paying benefits as soon as you become eligible.
Do I need short-term or long-term disability insurance?
Disability insurance is available in two different variations: short-term and long-term. You may not be sure which type is right for you. The truth is, to have adequate protection, you may need both short-term and long-term coverage.
Short-term disability insurance covers disabilities that last a few months. However, your short-term disability insurance likely wouldn’t cover your needs if the disability extended beyond the stated 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 something called an elimination period. An elimination period is a duration of time immediately after the disability occurs in which the policy doesn’t pay benefits. 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 are my premiums calculated?
Worried that disability insurance will be too expensive for your budget? 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.
Insurance companies consider your age, your health, your occupation, the policy benefit amount, the length of time the benefit could be paid and more when calculating your premiums. There are some different factors and features you can adjust on 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? Let’s talk about it. Contact us at J. Harris Financial today. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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