Don’t underestimate the need for disability insurance


Being unable to work could result from any number of circumstances. Cancer, heart disease, worsening medical conditions like diabetes, injuries caused by an accident, and behavioral health illnesses are just a few examples of common situations that can lead to significant time out of work.

Why you might need disability income insurance
If you work and earn a living, consider your need for disability insurance. But how much disability insurance should you have? The answer typically depends on three factors; how much income you’ll need if you become disabled, how much money you can afford to spend on premiums, and how much insurance you’ll be able to purchase under the insurance company’s guidelines.

Here are some expenses you may face:

Medical expenses:
You can expect your medical expenses to rise when you suffer a disability. Assuming you have health insurance, you’ll probably have to satisfy a deductible as well as out-of-pocket costs like co-pays, which may increase your expenses immediately after your disability occurs. In addition, if you suffer a long-term disability and are forced to quit your job, your group medical insurance coverage may be terminated.

Living expenses:
What if a disability prevents you from being able to drive, clean your home, mow the lawn, or cook for yourself and your family? Will you need to hire household help to take care of day-to-day activities that you can no longer do? Hiring help can be a substantial, unexpected expense when you become disabled.

Child-care expenses:
Can you afford child-care if you or your spouse become disabled and unemployed? The disabled partner may be able to care for the children at home, but not if his or her disability is too limiting. On the other hand, if you currently stay at home with your children, you may be forced to return to work if your spouse is disabled, and you may have to contend with the unforeseen additional expense of child-care.

Do you already have disability insurance?
You may already be covered by disability insurance through your employer. This may be short-term coverage, long-term coverage, or both. Short-term coverage typically pays for a period of 13 to 26 weeks. Long-term coverage pays a monthly benefit that begins after the short-term period expires. If you have one type only, you may wish to consider adding a private policy for the type of coverage that your employer does not provide.

How much insurance should you buy?
Once you’ve decided you need to buy more disability income insurance, you should aim to cover a significant portion of the income you will lose if you become disabled. The insurance company determines the maximum amount of disability income insurance you can purchase based on your income, health, age, and the amount of other disability benefits to which you’re entitled. Most companies will sell you insurance that replaced 50% to 70% of your monthly pretax earnings (of course, you can opt to buy less than this amount).

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016.

Speak Your Mind