Disability Insurance

Disability insurance is income paid out on a weekly or monthly basis to those that cannot work because of injury or illness.

Disability insurance payments are usually a function of your income, such as 60%, or a set payment as established through litigation or agreement. The disability insurance policies will determine just how much is paid, when it is paid, how soon you will begin receiving disability insurance and when the payments will cease. The benefit period may depend on the whether the disability is caused by illness or accident.

Disability insurance is available through an employer’s health benefits package. Some employers provide long and or short term disability insurance as part of the compensation package. Disability insurance is also available through insurance companies and can be purchased as a standalone package without the benefit of a health care package. There are public sector programs available that provide disability insurance and they are Social Security and State Disability Insurance programs. Federally sponsored disability programs cover coal miners, federal civil servants and members of the military.

According to the Field Guide for the National Underwriters organization, the chances of a person at age 40 have a 43% chance of becoming disabled for 90 days or more prior to the age of 65. If that were to happen to you, with disability insurance, you will receive payments to cover your financial obligations such as mortgage payments, car payments and buy groceries for the family.

If you were undecided about disability insurance consider your savings and the effect would have on that if you were to be disabled and not able to work. If you managed to save 10% of your income every year for 10 years, one year of disability without the benefit of disability insurance, your savings would be wiped out within one year. Consider also how your financial obligations would be paid if you were disabled and not receiving disability insurance. If you are not employed, you cannot get a loan. Is your spouse or partner able to earn enough to lend support as well as be a companion, care taker and still have time to take on a job?

If you are disabled you cannot collect social security benefits until after the fifth full calendar month of disability and only if your disability is expected to last 12 months or more. Will you be able to wait 6 months before receiving social security payments, but what if you do not fit the requirements for social security?

Without disability insurance, you may be forced to sell some or all of your investments such as your boat or Jet Ski. Perhaps you have a vacation home you enjoy, but if it means meeting financial obligations and feeding your family, you may be forced to sell it. What about your primary residence? If you have to sell your house or any of your investments, will you get true market value if you are in a panic sell situation? Those are the things to consider when considering disability insurance.