No one likes to think about becoming disabled, but it happens far more often than you may think. Persons 40 and older have a one-in-four chance of experiencing a short or long term disability before retirement. Before the sub-prime crisis, the number one reason for home foreclosure was disability.
According to the Department of Labor, 36.1 million people, or 12.1 percent of people in the U.S. reported at least one of the six types of disability in 2008. Disabilities as defined by the department include difficulties with hearing, vision, cognitive, ambulatory, self-care and independent living.
Your Most Valuable Asset
Disability insurance protects your most valuable asset: your earning potential. It can also be integrated with group disability insurance and coverage can be tailored to your profession-specific skills and physical assets. Disability coverage can also protect qualified retirement plan contributions before age 65. Overhead disability insurance is available for business owners and principals to keep business operations running smoothly in case of a medical emergency.
Group disability insurance underwrites the insured’s base salary (typically covers only 50% to 65% of an employee’s salary) and usually does not cover bonuses or commissions, which can account for a large portion of a highly compensated employees income.
Not All Coverage Is The Same
When buying disability income for yourself, there are a few keys items that should be researched carefully. For example, some disability coverage will not pay if you’re able to carry out any job function, versus being able to perform your particular job. Pay close attention to the elimination period where you are required to self insure before your start to receive benefits, and to protection against inflation and the increase in the cost of living.
Can / Will You Afford Not To Be Covered?
Most people generally can not afford an unexpected period of disability and it could potentially deplete your personal savings and leave you and your family with no income. Anyone who works for a living should consider including disability income insurance as part of their overall financial plan.
Group disability insurance underwrites the insured’s base salary and usually does not cover bonuses, commissions or K-1 distributions which can account for the bulk of highly-compensated employee compensation.