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Think you don’t need disability insurance? You’re healthy and you don’t work in a high-risk occupation, right? So what’s the chance anything could happen? According to a Gallup survey, most people estimate they have only a 16 percent chance of becoming disabled during their working years. But statistics show that a 35-year-old individual has a 50 percent chance of incurring a disability for 90 days or more before they turn 65. You can’t predict when you’ll need disability insurance or why. But consider that back disorders are the most commonly cited conditions that cause working limitations, followed by heart disease and arthritis. “Disability insurance protects your family’s financial security. Plus, benefits can be paid directly to you – you can receive a benefits check made out to your name, which you can then use to pay for your living expenses,” said Brad Buechler, first vice president and actuary at Mutual of Omaha. He pointed out that almost 50 percent of all residential mortgage foreclosures are brought about by a disability. Even if you have long-term disability insurance through your employer, you may want to consider an individual policy as well. Group long-term disability insurance benefits offered through employers typically guarantee replacement of 50 to 60 percent of your salary and begin when sick leave and short-term disability benefits stop. This may not be enough to meet your needs in the event of disability. Also keep in mind that benefits from an employer-paid plan generally are taxable, while individual policies pay benefits free of income tax. Finally, individual coverages are portable and don’t automatically terminate if you change jobs, unlike group coverages obtained through your employer. To determine if an individual disability policy is right for you, figure out if the total benefit from your group policy would be enough to support you and your family. Typical expenses for most families include groceries, mortgage payments or rent, utility bills, car payments and clothing. Make a list of your expenses and then ask yourself the following questions: * Do I have disability insurance through my employer? If so, are the benefits sufficient to allow me to maintain my standard of living if I become disabled? * If my current benefits are not sufficient, what expenses will I cut if my income is reduced by half? * What other sources of income do I have in the event I can’t work? * Would my spouse’s income be sufficient to pay my family’s bills? A good rule of thumb, according to Mutual of Omaha’s Buechler, is to allocate 1 to 2 percent of your income for supplemental insurance, such as disability coverage. The cost of an individual disability policy is reasonable, especially when you consider what is at stake if you don’t have the coverage and become disabled, a much more likely event than most people realize. |
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