by Deborah Bernstein
A disabling accident occurs every second in the U.S. with many of these accidents qualifying for disability income insurance.
What would your family do if your paychecks stopped tomorrow and didn’t resume for several months or longer? What if this became several years? In some cases, social security may help with disability income, but many claims are denied by social security because applicants don’t qualify. A policy that guarantees total income replacement is the optimal coverage to shoot for. Standard coverage is usually 50 to 60% of your income as a baseline as the income is not taxable. The cost of disability insurance is based on many factors including duration of benefits, age, lifestyle and health.
As a careful planner myself, I cannot imagine the strain on our family if either of us lost our ability to earn our incomes. Long term disability income insurance protects your earned income when you are unable to work for a sustained period of time. You may acquire a non-physical condition or a physical impairment, either one might prevent you from working. In those cases, a disability income insurance policy will pay you. One out of every three people in the U.S. workforce will suffer a disabling injury before retirement. The question to ask yourself is this: “can I afford to be disabled without income for 90 days or longer?”
Too often, this risk is exposed in well-balanced financial plans, especially for women. In households where women are the sole income source or an equal income partner, disability income insurance is necessary. The risk of long-term disability is typically measured by loss of income and the additional costs of care for severe disabilities, especially for the household’s primary wage earners. In these cases, a serious financial hardship is easily mitigated with an affordable long-term disability policy.
Own Occupation
Under “Own Occupation” disability, the policy pays benefits when you are unable to work at your own occupation as a result of an accident or sickness. This type of policy is the most expensive and more difficult to obtain. These types of policies are very popular with professionals who wish to insure a specialized skill. For example, a heart surgeon may want this type of policy in the event he or she loses the use of a hand or seriously injures the fingers on one hand.
Any Occupation
The “Any Occupation” definition means the inability to work at any occupation. This definition is sometimes softened by adding language such as “the inability to perform the duties of any occupation by which the individual is suited by training, education or experience”. These policies are less expensive and easier for most to obtain. A heart surgeon who loses the use of one hand may no longer be able to perform specific duties of a heart surgeon, but may be able to consult or work in a different medical field. This type of coverage only pays when gainful employment is not possible. The “any occupation” definition can be different in every policy.
Hybrid Policies
Many disability policies now offer options allowing you to blend the “own occupation’ rider with the “any occupation” riders. A common example would be a policy issued with two years of own occupation, switching to any occupation for the duration of the disability. These policies have lower premiums and are considered more affordable for some people.
Please contact me for a DI quote. You can email me at DB@LifeCyclePlanners.com or call me directly at 561-329-4721.
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