Statistically, it is three to six times more likely that your income will stop because of being too sick or hurt to work than being too dead to work. And yet disability insurance is often ignored in risk management. Of all forms of insurance, disability insurance has the highest probability of occurrence from ages 25-65. Yes, paying premiums will reduce your disposable income, but far better that than having your income stop and nothing coming in to take its place! When you are dead, it won’t matter if the income stops. If you are disabled, however, it matters a great deal to you and your family, too.
Do I Need Disability Insurance?
A simple test is to ask yourself if you would be able to make your house payment and all your bills if your income stopped for the next 90 days? If not, or if it would be a stretch, then you are a prime candidate for considering long-term disability insurance.
What is the Primary Cause of Long-Term Disability Claims?
Most people mistakenly believe that the major cause of disability is from an accident. The statistics rebut this notion and indicate that disability is usually caused by a gradual decline in health or by a degenerative condition. Still, if your income stops, it doesn’t matter “why?” – what matters is how you will cope. How much will you need and where will it come from – quickly?
If You Are a Professional, Do You Have a True “Own-Occupation” Contract?
A true “own-occupation” (“own occ”) contract means that even if you can work at some other type of employment, you will be deemed disabled if you cannot perform the primary duties of your occupation specified in the contract. Don’t make this mistake … many professionals think they have a true “own-occ” coverage because the marketing material and/or the proposal for their disability insurance mentioned that they were getting an “own-occ” contract. It is vitally important to look at the actual definition of total disability in your contract to determine whether you have true “own-occ” coverage.
Is the Amount of Income Replacement Sufficient In the Event of Your Disability?
Frequently, I find that clients have outgrown the disability contract’s monthly benefit. The benefit amount may have covered their salary when they initially bought the coverage, but often it is now too little. Often there is room for additional coverage because their income is now substantially higher, and expenses are greater today than when the contract was purchased.
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Written by R. J. Kelly – January 2017