4 Key Reasons to Purchase Disability Insurance
By Joe Globensky, RFC®
Millions of working Americans are facing a growing crisis: a lack of adequate disability insurance coverage. Without some type of income protection, more Americans are experiencing severe financial difficulty if they need to miss work due to illness, injury, or pregnancy. Disability insurance is more important than ever.
May is Disability Insurance Awareness Month. This is an opportunity for the insurance industry to raise awareness about the importance of income protection. So, let’s look at four key reasons to purchase disability insurance.
#1 Reason to Purchase Disability Insurance: Social Security doesn’t cut it
Social Security Disability Insurance (SSDI) is a program under which people earn coverage for benefits by working and paying Social Security taxes on their earnings. The program provides benefits to disabled workers but, the Social Security Act defines disability very strictly.
It defines a person as disabled when they can’t work due to a severe medical condition that has lasted, or is expected to last, at least one year or result in death. The medical condition must prevent you from doing work you did in the past, and it must prevent you from adjusting to other work. And Social Security doesn’t provide temporary or partial disability benefits.
If you meet the strict disability definition, Social Security disability payments are modest. At the beginning of 2019, Social Security paid an average monthly disability benefit of about $1,234 to all disabled workers. This was barely enough to keep a beneficiary above the 2018 poverty level.
#2 Reason to Purchase Disability Insurance: Your family relies on your income
As we’ve seen from the recent pandemic, life can change quickly. An illness or injury could take away your ability to earn a living. An income in the form of a steady paycheck is your most valuable asset and provides for you and your family.
Without disability insurance, 50% of Americans said they would use their savings to help them meet their expenses if they were unable to work due to illness or injury.* Protecting a paycheck with disability insurance can secure your family’s financial future.
* The New American Milestones (2020), Life Happens
#3 Reason to Purchase Disability Insurance: Most long-term disabilities are due to illness, not accidents.
According to the Social Security Administration, 25% of today’s 20-year-olds will become disabled at some point in their career. That’s a pretty big risk to take. How long would you be able to meet your rent or mortgage, car payments, bills, and other monthly expenses if you couldn’t work?
It’s a common misperception that you only need disability insurance if you work in a dangerous profession. The truth is, illness, not accidents, accounts for most disabilities that keep people out of work. And if you thought your employer’s Workers’ Compensation coverage would protect you, think again. It only pays in cases where your illness or injury is related to your work. The vast majority of long-term disabilities are not job-related.
#4 Reason to Purchase Disability Insurance: It’s not as expensive as you might think
The cost of disability insurance will depend on several factors including your benefit amount, benefit period, occupation, health status, age, and terms of the policy. As a general rule of thumb, however, the cost of an individual long-term disability insurance policy is about 1% to 3% of your annual salary. And it’s the most cost-effective form of income protection you can get.
You can minimize the cost you pay each month by applying young, living healthy, and carefully evaluating your coverage options. That’s why the best time to buy disability insurance is right now!
It’s time to act now to make sure your income is protected. At Connections Financial Advisors, we provide investment management, financial and retirement planning, and other personal financial services in a comfortable, no-pressure atmosphere. If you are unsure about your income protection strategy, or just want a second opinion, give us a call at (217) 605-8130 or send us an e-mail.
The content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
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