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.
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
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