The world teaches us about life insurance – our parents, commercials, etc. And while you only die once, you can be injured or become ill multiple times. Are you prepared for those situations?
Many of us get some type of insurance through our employers; some of us don’t. Regardless, it’s important to know how your expenses will be paid if you are disabled for greater than three months. The truth is that during the course of your career, you are three and a half times more likely to be injured and need disability coverage than you are to die and need life insurance. (For related reading, see: Protecting Your Income With Disability Insurance.)
Here’s a primer on why disability insurance is important, and why you need to understand your benefits.
- You are your most valuable asset. Your most valuable asset is not your home or your car. It's you. Your ability to make a living allows you to enjoy the riches and opportunities associated with your life. A roof over your head, eating food you enjoy, paying your child's educational expenses, taking that next vacation – this is all based on your continuing ability to earn income – whether you are working for yourself or someone else. Chances are you are not only responsible for you; you are probably responsible for others, as well. Don’t leave your loved ones unattended.
- Life happens. Forty-one percent of long-term disability recipients over the 2009-2012 time period were younger than 50, with a third of those under 40 (according to Unum, an insurance provider). Being prepared means when life throws you a curve ball you have the capacity and assistance to move forward. Don’t shy away from this conversation. We all know someone who has been in a difficult situation. Don’t assume this couldn’t be you and that there's no chance you'll need disability support.
- Disability insurance through my employer. This is short-term disability that kicks in after your sick time. Benefits are usually available for one year. If you believe you have disability insurance through your employer, check your policy. What is the maximum monthly benefit you can receive and how does that coincide with your monthly expenses? Many employer policies allow you to purchase more insurance. If your expenses are greater than the maximum benefit, consider purchasing additional insurance. And, note, there may be a cap on the monthly benefit amount, regardless of your income.
- Private disability insurance. This is long-term disability insurance and can pay benefits until you reach age 65 or the end of your life. As with all insurance, the time to buy it is when you don't need it. Speak with a financial advisor, insurance broker or contacts through professional groups and affiliations to gather additional information about the types of disability insurance and what meets your need.
- What to do? Review your ongoing expenses and your take-home pay. Check out your options during open enrollment. Disability insurance and its myriad of policies can be confusing. However, the time to act is now, and you may not be eligible after injury or illness. With the advent of new medical technologies, we are all more likely to be disabled than to die. (For more, see: Is Life Insurance Through Work Enough?)