You’d like to think you’ll never be sidelined by a serious injury or illness. But should the unexpected happen, disability insurance can help protect your assets when you’re unable to earn a paycheck.
Am I really at risk?
According to the Council for Disability Awareness:
- Of today’s 20-year-olds, more than 1 in 4 can expect to be out of work for at least a year due to a disabling condition before they reach the traditional retirement age of 65.
- Accidents are not typically triggering events for disability insurance. Back injuries, cancer, heart disease and other illnesses cause most long-term absences from the workplace.
But there’s good news. Having a policy in place long before you need it is just as beneficial as planning for other future financial emergencies.
A way to protect your income
If you don’t have disability insurance, or enough emergency savings to last about three years — which is the duration of the average long-term disability claim — you could easily drain your finances. Accumulated sick time or paid leave may be used up faster than you realize. That’s where disability insurance can help fill the income gap. On average, you may qualify for income replacement equal to about 60 percent to 70 percent of your regular income if you become sick or hurt, and unable to earn a paycheck.
Know your disability insurance options
First, your doctor must determine if an illness or injury has left you unable to perform your job. After that, your policy’s definition of disability will dictate whether or not you will receive benefits. There are two types of disability insurance policies — short- and long-term. Short-term disability insurance provides income replacement from 13 weeks up to two years. The policy usually activates after a waiting period, which can be up to four weeks. In some cases, if an accident disables you, your policy may allow you to receive benefits immediately.
Long-term disability insurance provides income for longer periods including up to retirement age. The waiting period is often anywhere from one to 30 months, but the benefit duration is about 60 months. If you have both short- and long-term disability policies, you must use all of your short-term benefits before your long-term benefits take effect.
How to get disability insurance coverage
The most affordable way to get disability coverage is through your employer, if available. Talk to your human resources representative about your options. Then have the premiums deducted from your paycheck. Your personal insurance agent may be able to provide a policy too.
A slip and fall, or serious medical emergency could keep you out of work for an extended period. Consider disability insurance now to cover a “just-in-case” event later.
Article provided by Local Government Federal Credit Union. Contact your insurance provider for additional guidance.
The advice provided is for information purposes only.