Protect Your Income with Disability Insurance
The biggest risk to your future financial security isn’t the chance that the stock market will crash or your company could go belly up at a moment’s notice. These risks pale in comparison to a risk that many people don’t ever consider: The chance that they could become disabled and not able to work. Disability is one of the leading causes of bankruptcy in the U.S., and it’s more common than many people realize. And with the average long-term disability lasting two years, few people have the financial resources to endure a lengthy period of unemployment. That’s where disability insurance comes in. Put simply, this type of coverage replaces a portion of your income if you’re no longer able to work. It’s one of the most essential types of insurance protection out there. It’s also one of the most overlooked.
The Limits of Social Security
Many people assume that Social Security will provide for them if they can’t work. But while Social Security Disability Income (SSDI) is an important source of income for many, it won’t pay that much, and it can take months or years for claims to be approved. Disability insurance, on the other hand, starts paying claims much more quickly. Plus, the amount you get is determined based on your income, and you have the freedom to choose the level of coverage you need.
Two Types of Disability Coverage
Disability insurance comes in two broad types: short term and long term. Short-term policies pay benefits fairly quickly — usually within a few days or weeks of when your disability starts. As the name suggests, benefits will only be paid out for a short amount of time, usually a few months. You may already get short-term disability insurance through your employer. Or in some states, you may pay into a state-run short-term disability insurance program. This short-term coverage can be extremely useful if you have a accident or illness that requires a relatively brief time off of work to recover. For example, women may be able to use short-term disability to take time off work with pay after having a baby, or you may use it to supplement income for a few months after breaking your leg in a car accident. But what if you have an accident that has a longer recovery time? Or even worse, could keep you out of work indefinitely? That’s where long-term disability insurance comes in. Long-term disability pays a portion of your income, anywhere from 50% to 70% (you choose how much when you select your policy). Coverage usually begins within a few months of becoming disabled and how long it lasts depends on your policy. In some cases, coverage may only continue for a few years. In others, you may continue to receive benefits for as long as you are disabled (the latter is more expensive, of course). Every long-term disability policy is slightly different. Sometimes the benefits you receive may be taxable (if your employer pays the premiums), though in other cases they may be tax free (if you paid the premiums yourself). You’ll also need to pay attention to the own occupation or any occupation clause. The latter only pays benefits as long as you are unable to work at any type of job. For example, let’s say you were previously a truck driver but are disabled and can no longer drive. If your LTD insurance is any occupation, you’ll only get benefits if you also can’t work in any other occupation that you could be reasonably expected to perform. If you’re capable of working at another job, your claim may be denied. Own occupation coverage, in contrast, pays benefits when you’re unable to work in your chosen profession. There are a lot of other details to consider before purchasing disability insurance. You’ll want to find out whether the policy comes with inflation protection, whether receiving other benefits will affect your monthly benefit, whether there are survivor benefits, and how disability is defined. All these factors will affect whether or not a policy is a good fit for your needs.
Representative is registered with and offers only securities and advisory services through PlanMember Securities Corporation, a registered broker/dealer, investment advisor and member FINRA/SIPC. 6187 Carpinteria Avenue, Carpinteria CA. 93013, (800) 874-6910. Randall Wealth Management Group and PlanMember Securities Corporation are independently owned and operated. PSEC is not responsible or liable for ancillary products or services offered by Randall Wealth Management Group or this representative. CA Insurance License: #0I08678.
This newsletter was prepared by Integrated Concepts Group, Inc. The opinions expressed in this newsletter are for general information only and are not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. The views expressed are those of the author and may not necessarily reflect those held by PlanMember Securities Corporation. Material presented is believed to be from a reliable sources and PSEC makes no representation as to it accuracy or completeness.