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Planning the financial future? Don't forget long-term disability

Many people in Garden City have taken steps to protect their financial futures. They've saved for retirement and purchased life insurance policies in case they died young. However, one aspect of financial planning that sometimes goes forgotten is planning for the possibility that one will have to leave the workforce early due to a disability.

This is unfortunate, as many people may find that if they are unable to earn an income, they quickly go through what savings they have, if any. Moreover, applying for federal disability benefits can take years, and even once they are awarded they may not be sufficient to meet all of a person's financial needs. Therefore, planning for one's financial future should include planning for long-term disability.

Sometimes a person has long-term disability insurance coverage through their employer. Sometimes the employer will pay the premiums for such coverage, or at least provide workers with heavy subsidies. In fact, these days even those who do not receive such coverage from their employer, are independent contractors or are self-employed can obtain long-term disability insurance, if they can show they have a stable income.

That being said, even if a person does have long-term disability insurance through work, it may only cover a certain percentage of their income, which could still lead to financial difficulties. For example, some policies only cover up to 60 percent of what a person earns, and these benefits will be taxed if it is the worker's employer who covers the premiums. Moreover, there may be monthly benefit caps as well.

However, a person can purchase supplemental long-term disability insurance to increase the benefits they would receive if they became disabled. These policies can provide a higher percentage of coverage and the monthly cap can be higher as well. And, if the individual is the one responsible for paying premiums, the benefits they receive won't be taxed. However, any long-term insurance policy will not cover 100 percent of a person's income.

It is important to understand what your long-term disability insurance benefits will cover based on the type of disability and a person's occupation. In the end, those who have more questions about long-term disability or who believe they have been denied benefits they are rightfully entitled to may want to bring their concerns up to an attorney, who can provide legal advice.

Source: Kiplinger, "Why You Need Disability Coverage," Kimberly Lankford, March 2017

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