Most of us have insured our house, possessions,
cars and our lives. However,have you insured something that might be
even more important:your ability to consistently earn income?This may
be the most important asset you have.
Consider the following:if you currently earn $50,000 a year and you're 35 years old, from now until you're 65 you’ll earn $1.5 million. That assumes your income never increases, which it almost certainly will.
Consider the following:if you currently earn $50,000 a year and you're 35 years old, from now until you're 65 you’ll earn $1.5 million. That assumes your income never increases, which it almost certainly will.
Doesn't that
seem like it might be worth protecting? Is your house or car worth $1.5 million?
Most of us don't own any single object worth $1.5 million.
What Are the Chances of Actually Needing to Use Your Disability
Insurance?
Disability insurance insures your
ability to earn income. Many people hear the word "disability" and
immediately think of an accident. But most long-term disabilities are the
result of illness, such as heart disease or cancer. Every year, over 12% of adults in
the United States have a long-term disability.
Not only that, but one out of seven
employed residents of the United States will have a disability that lasts 5
years or longer before age 65. The odds of suffering a disability that lasts
at least 3 months is over 50 percent.And the U.S. Department of Housing
and Urban Development has estimated that 45 percent of foreclosures are due to
disability.
What about social security?
Social security does provide benefits, but qualifying is not always easy. The
benefits provided are rather limited, even for the most frugal of people.
How to Get Disability Insurance
Large employers typically offer
short-term and long-term disability insurance. This coverage is frequently
affordable and will cover 50-60% of your salary. The total payout may also be
capped.
If you prefer or need to go with an
individual policy instead of through your employer, be aware that they can be
quite expensive, but have far more flexibility to provide what you need.The
cost of an individual policy can vary dramatically, but expect to annually pay
1%-3% of your salary to replace 60% of your salary.
Some factors that influence the premium include:
1.
The monthly payout. Obviously, the more
money you would receive in the event you suffer a disability, the more your
policy will cost.
2.
How "disability" is defined. Does
it pay if you are unable to do your job? Or does it only pay if you are unable
to do your job and any other job for which you're qualified? What if you can
work part of a day, but not the whole day? Be sure you know what you're getting, and what
you're not getting.
3.
How long is the waiting period before you
start receiving your payments? The longer the waiting period, the less
expensive the policy will be.
·
This is a good reason to have that 4-6 month
cash reserve you're always hearing about. If you don't currently have it set
aside, get started today!
4.
Your occupation. Some jobs are simply
more hazardous than others. Everything else being equal, a construction worker
should expect to pay more than an accountant.
5.
Cost of living. Some policies cover cost
of living increases. This can make a big difference, depending on the length of
your disability.
6.
Additional purchase option. Once you’re
insured, this option would allow you to purchase additional coverage later on
without having to submit to another physical.
Disability insurance is the
insurance that everyone seems to forget about, especially those who are self-employed.
But this may be the most important insurance you can purchase!Look into disability
insurance today; your future and the future of your family may depend on it.
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