Disability Insurance: Why would you ever need it?
By Shane Dekle
Many people mistakenly believe they don’t need disability insurance because they do not work in a dangerous occupation. Fact is, 90% of all disabilities that keep people out of work are the result of illnesses, not accidents(1). Everyone who works for a living needs to protect their paycheck! According to the U.S. Social Security Administration, 20-year-old workers have a 1 in 4 chance of becoming disabled before they retire(2). In fact, the average American drawing Social Security disability benefits is 50 years old. The average Social Security Disability Insurance (SSDI) is only $1,113 per month. Is that enough to cover living expenses? For most of us, the answer is likely no.
Two Big Myths I See All The Time:
- I Can Rely on Workers’ Comp
- I already have disability insurance through my employer
According to the Council for Disability Awareness, a small fraction of disabilities are covered by workers’ compensation insurance, and the benefits are often temporary(3). Similarly, qualifying for SSDI can be difficult, and approval can take months. In addition, your employer’s policy may not pay you enough to live on, or pay you for very long.
What’s the Solution?
For maximum protection, make sure you have both short-term and long-term disability insurance. Many employers offer short-term coverage that will typically replace around 40 to 60 percent of your income for three to six months while recovering from a temporary disability. As the name implies, long-term coverage provides you with income during a lengthy or permanent disability. These benefits usually start three to six months after a person becomes disabled and can continue for a period of several years or even until age 70. For additional protection, consider augmenting this coverage with a personal policy.
What Should You Look For in a Policy?
Here are some considerations:
- “Disability” definition: Must you be unable to perform your regular job or any job? Be sure you understand the definition.
- Onset of benefits: If your savings can cover several months of expenses, reduce monthly premiums with a longer waiting period.
- Partial benefits: These can provide you with some income if you can’t work full capacity. Cost-of-living adjustment (COLA): Adding a COLA option will increase benefits to keep pace with inflated living expenses.
It pays to do your homework and talk with a professional before selecting the policy that best fits your needs and budget.
References
Life and Health Insurance Foundation for Education (LIFE) Foundation, 2012.
U.S. Social Security Administration, Fact Sheet February 7, 2013
Council for Disability Awareness, Long-Term Disability Claims Review, 2012 – See more at: https://learningcenter. statefarm.com/insurance/health/disability-insurance-a-good-idea/#sthash.YOO4WNgR.dpuf
Shane Dekle is a native Athenian and a graduate of UGA’s Terry College of Business. He is married to Natasha and has two daughters, one son, a dog and several chickens. As owner of Shane Dekle State Farm, his primary focus is on ensuring his clients have the proper insurance protection and financial security plans in place to confidently achieve dreams and goals. Visit www.shanedekle.com for more information or call 706-543-8400.
