There are several types of disability insurance. Among them are Individual Disability Income. Mortgage Disability and Credit Disability. If you’re thinking you can’t afford disability insurance or that you might not REALLY need it…this article is for you!
Did you know that you are more likely to receive disability benefits than receive death benefits from a life insurance policy? However, many people choose to insure their “lives” but forget to insure their livelihood. “Studies show that a 20 year old worker has a 3-in-10 chance of becoming disabled before reaching retirement age.” (SSA Publication No. 05-10029:www.ssa.gov/dibplan/index.htm). Your ability to work might be your greatest asset yet it is one of the least protected by some.
Imagine if you lost your job and could no longer generate income. Think about how long it would take to deplete your “emergency savings” in relation to how long it took you to create that nest egg…if you even have it at all. Many people loose everything and end up claiming bankruptcy due to disability. Fortunately this doesn’t have to be the case. Disability insurance allows you to affordably put a plan in place for the unexpected.
Individual Disability Income is designed to replace 45-60% of your gross income tax free. Disability is defined as an inability to perform the duties of your current job. This coverage provides if you are disabled due to a freak accident or because of an illness such as cancer or heart disease. There are a few features that you want to make sure your policy provides. You want to make sure that the policy covers if you cannot work in your current occupation and not just in any occupation. It’s also important to make sure the policy is “guaranteed renewable” that way your insurer can’t cancel the policy as long as you maintain the premiums. Most are payable to age 65. Additionally, you want to consider the “elimination period” this is the amount of time you must be disabled due to injury or illness before the policy kicks in. This period can generally range from 30 days to 6 months. An important fact to note is the elimination period is a key factor in determining the premium. The shorter the elimination period the more expensive the policy. The other major factor effecting price is your “occupational class” meaning the type of job you have related to the statistical likelihood that you will sustain an injury that will prevent you from performing that specific occupation.
There are other riders to consider as well such as the Social Security rider and the Cost of Living Adjustment Rider (COLA). According to USA.GOV, “Disability” under Social Security is based on your inability to work. We consider you disabled under Social Security rules if
You cannot do work that you did before;
We decide that you cannot adjust to other work because of your medical condition(s); and
Your disability has lasted or is expected to last for at least one year or to result in death.”
The COLA rider provides for an increase in benefits annually in order to keep pace with inflation. This coverage is crucial in terms of a long term disability.
Mortgage Disability is designed to pay the amount of your mortgage in the event of disability. More people foreclose on their homes each year due to disability than any other reason.
Credit Disability can be purchased at the time of a vehicle loan for pennies a day to ensure that even if you become disabled it will pay the remaining balance on your outstanding loan.
Now that you’re aware of the likelihood that you could become disabled take action and call an agent today to discuss how you can properly insure your greatest source of income…your ability to work!
To find out more about Disability insurance rates, please call our office or visit Paramount Philadelphia Insurance for further information.