Have you ever considered what would happen if you became injured or ill enough that you would no longer be able to go to work everyday? Do you have a plan in place that would continue generating a form of income during a period of time where you were unable to earn one? If you do not already have a plan in place then Disability insurance is something that you should consider.
Disability income insurance is one of the most overlooked types of insurance available to the individual market. This is partly due to many reasons, of which cost and lack of publicity wouldn’t be the least. Regardless of who or what is to blame, many Americans do not have any level of income protection. If you are fortunate enough to be aware of the risk associated with a debilitating injury or illness and the affect it may have on your income, you should take the appropriate measures to obtain Disability insurance.
If you do not already know, Disability insurance is a product that provides income protection against a debilitating injury or illness. If an injury or illness prevents you from being able to do your job, Disability insurance will provide you with a specific dollar amount every month to replace a percentage of your income, while you remain disabled. It is a product that allows you to continue providing for your family, paying your bills and maintaining a similar quality of life.
Depending on your occupation and work situation, you may be able to obtain Disability insurance through an employer sponsored group plan. If not, you can also obtain it on an individual basis. In order to purchase coverage, you can either research online and request Disability insurance quotes from a website or agent that you are comfortable working with, or ask friends and family for a recommendation. Whichever way you decide to do it, you should be sure to work with an experienced agent. Do not mistake experience for age or years of being an insurance agent. Many financial professionals have very limited experience with Disability insurance, even over a 20 or 30-year career.
So just how important is Disability insurance? Consider the following fictional example:
A 35-year old person earning an annual income of $50,000 will earn a total of $1.5 million throughout his/her career if he/she works to age 65 and does not experience any pay raises. Depending on the individual’s tax bracket, this person will actually take home around $1.2 million after taxes. If he/she becomes disabled at age 35 and never returns to work again, this person would be losing $1.2 million.
By having Disability insurance to protect his/her income, this would not be the case. Based on a $50,000 income this person qualifies for approximately $2,700 of monthly disability benefit, which is equal to $32,400 per year. During the same 30-year period of time (going to age 65), he/she would have received at least $972,000 of total Disability benefits.
Although it does happen, the previous example is clearly exaggerated. However, even a 2-year Disability claim (shorter than the average claim) can create great financial distress. After taxes, this same person earns approximately $80,000 within 2 years of working – a considerable amount. No matter what level of income you earn, if you rely on your income, than a 2-year break from work could cause a considerable hardship to you, your family, lifestyle, finances and savings.
Disability insurance puts guarantees in place so that if a tragedy occurs, you and your family are not exposed to a financial disaster. If you do not already have Disability insurance, or are uncertain as to whether you should purchase it or not, be sure to give it considerable thought – not only on how a disability would affect you, but also how it would effect your family and loved ones.
