Despite all of the battles that we wage on behalf of clients and their families, we still advise our clients, colleagues and friends to make sure they have disability insurance policies in place. We also advise those who are employees to look into purchasing additional private disability policies.
The disability insurance coverage provided as part of your employee benefits package has many restrictions, but think of it as a basic coverage plan. Do the math – how much income would you need to replace if you or your spouse were unable to work?
Disability insurance services to protect your salary if a health issue sidelines you from work. Usually when employees are looking at their benefits during open enrollment, the last thing they look at is disability insurance. That comes after their retirement accounts are chosen, they go through the options for health care solutions and read a little bit about their HSA (Health Savings Account).
If you don’t have disability insurance, or enough disability insurance, how are your bills going to be paid?
A recent article from CNBC, “1 in 4 workers run into this career derailment, but you can protect yourself,” reports that about 20.1 million adults of employment age have suffered a work disability. Research published by the National Institutes of Health found the common causes to include back or neck problems, depression, anxiety or other emotional issues, and arthritis or rheumatism.
People also tend to purchase the minimal amount of disability insurance. Companies are savvy about this, so they offer what sounds like a better deal: you pick the amount of coverage you want, and then you have some control over the size of the deduction from your paycheck. But consider this: your chances of missing months of work are more likely than your dying prematurely, especially if you are under age 50.
Long-term disability usually starts after three to six months and costs around 1-3% of a worker’s annual salary. Most people’s disability insurance replaces about 60% of their income. Can your household keep going with that much of an income cut?
To see if you have enough disability coverage, do a budget and pay careful attention to the amount of money coming in and going out. Add the potential higher cost of increased medical bills, child care, and household services you’ll need if you or a spouse cannot perform tasks like housework, laundry, home maintenance.
Tapping emergency or retirement savings is a bad way to replace income. And remember when you are not working, you won’t be setting money aside for retirement.
Ask if your employer may let you buy more coverage through work. If you are self-employed, consider joining a professional association or chamber of commerce to purchase more disability coverage, which can cost less if the risk is spread out among many members. You could buy a private policy, if your budget allows.
Reference: CNBC (November 11, 2018) “1 in 4 workers run into this career derailment, but you can protect yourself”