What Issues Should You Consider When Purchasing Disability Insurance?

Employer-provided and individual coverage options should be coordinated with Social Security in order to ensure that short-term and long-term disability risks are mitigated. To help guide you through the complexities of this important financial planning topic, I'm making the checklist, "What Issues Should I Consider When Purchasing Disability Insurance?" available to download....
David Roberts
August 23, 2022

If you are still working, and your financial plan depends upon your income, then it is critical that you protect that income should you suffer an illness or injury that prevents you from continuing to work. Replacement income provided through both a short and long-term disability insurance policy can provide the peace of mind you want if you are ever disabled. Despite the direct implication to their financial stability, too many folks lack adequate coverage to defend against the risk of disability.

In fact, disability insurance receives little attention from both financial advisors and consumers. As a result, many people do not even have their income protected for just the first three months of a disability, let alone for years into the future. And this Social Security Administration data shows that disability is unpredictable and can happen to anyone at any age.

Pop Quiz: Do you really need disability insurance?

  • Would your ability to continue paying your family’s monthly living expenses be affected if your current income were interrupted or reduced?
  • Would your retirement goals – future lifestyle needs, wants, dreams, and legacy – be affected if your ability to save a certain portion of your income for years to come was either diminished or halted?
  • Down the road, do you want be able to help your children or grandchildren finance their college expenses, buy their first home, start a business, etc. but have not yet saved enough to meet that goal?

If you answered “yes” to any of those questions, then keep reading and make sure you get a copy of my resource for this financial planning topic. Click here to download this resource

SSDI and LONG-TERM group disability insurance

By law, only those who are chronically unable to work due to extreme illnesses or disability are eligible for Social Security Disability Insurance (SSDI). For the relative few who are approved, in 2021 the average income replacement was less than $15,000 per year. Unless your income is $15,000 or less, federal disability benefits will not come close to replacing your earned income or satisfying your need to save for future goals.

Short and long-term disability insurance through individual policies or offered through an employer’s benefits package have eligibility requirements that are typically less stringent than with Social Security. The amount of income replaced is also higher. However, the terms in these policies vary between carriers, and the amount of income replacement being offered may still be only a fraction of what you are earning (and need to keep earning).

Furthermore, eligibility is met by one of two classifications, known as “Own Occupation” and “Any Occupation.” You need to be aware of what these terms mean, so you can anticipate how these requirements will affect your options for continuing employment, as well as your ability to meet current financial needs and to save for future goals.

A resource to help with your planning

Employer-provided and individual coverage options should be coordinated with Social Security in order to ensure that short-term and long-term disability risks are mitigated. To help guide you through the complexities of this important financial planning topic, I’m making the checklist, “What Issues Should I Consider When Purchasing Disability Insurance?” available to download.

Click here to download this resource

This checklist covers key considerations, including:

  • Short-term and long-term needs
  • Federal benefits
  • Group and individual coverage options
  • Key features and variables
  • Tax implications

Other considerations

Rather than self-insuring against all financial risks in your life, owning insurance will transfer a large portion of your personal risk to a pool of other insurance customers. It’s the product almost everyone needs to own, but no one wants to have to use. But the premiums you’ll pay on a policy can help limit the amount of income you would have to put aside to protect you from damages, losses, liabilities, or disabilities.

It is possible to own two disability policies that, together, can completely replace your current earned income. Knowing you will be able to meet your living expenses while remaining on track to reach your financial and life goals will help to bring you the peace of mind you will want should disability strike. Matching your current income with an insurance solution is a great step towards taking control of your finances.

A final thought

It’s far better to invest the time to establish proper coverage while you’re healthy, rather than waiting until it’s too late to get approved for coverage. I know that safeguarding your current lifestyle and future financial goals are important to you, so now is the time to talk. I would like to discuss this resource with you and how you can best prepare for the risks potentially affecting your financial plan. Click here to download this resource

What Accounts Should You Consider If You Want To Save More?

What Accounts Should You Consider If You Want To Save More?

Investors often ease into their savings strategy with small investments into their 401(k) plans. Later, as their finances allow, they “graduate” into other investment vehicles for their retirement nest eggs, such as IRAs and taxable accounts. As their financial lives become more complex, many investors will ask, “If I have a fixed sum of money to invest every month or every year, what accounts should I consider if I want to save more?”

Will Your Social Security Benefit Be Reduced?

Will Your Social Security Benefit Be Reduced?

Choosing the optimal time to start receiving your Social Security benefit is an important step toward ensuring that your retirement income and savings will last throughout the rest of your life. No one wants to leave benefit dollars on the table due to a poor timing decision, not even those who have adequate savings and pensions and are not relying upon Social Security to fund their retirement. The problem folks are facing, though, is that choosing an optimal time to claim their benefit is neither simple nor straightforward.

A Guide to Setting Goals for Your Retirement

A Guide to Setting Goals for Your Retirement

Are you wondering how to set yourself up for retirement? Thinking you've reached the retirement age? It's important to take the time to make sure you can enjoy the next phase of your life. Ensuring you do the right financial planning for retirement is essential, and...

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