Why You Need Disability Insurance

Posted on: Wednesday, January 15, 2014

Generally speaking, Americans highly value insurance plans which protect their home, auto, and their family’s health. Many consider these policies as essential. Indeed, they are required by law in many states. Consumers seldom consider the possibility that they could lose their ability to earn an income which, essentially, is what disability insurance is all about. 

According to the MDRT (the Million Dollar Round Table, an insurance industry trade organization), about 30 percent of Americans ages 35-65 will suffer a disability lasting at least 90 days during their working careers, and approximately one in seven people aged 35-65 can expect to become disabled for five years or longer. One year of disability, even with 10% of your income in savings, could financially cripple you for a decade. Clearly, living without disability insurance can be risky.

What is disability insurance?

Many Americans believe that their employer provides them with disability coverage, and that Social Security can fill in any gaps in coverage. Even assuming that this is true, which is not the case for many Americans, employer provided total disability coverage usually falls far short of what the individual needs, and there are many limits to Social Security disability insurance. Disability insurance provides anywhere from 45 to 65% of your gross income, on a tax-free basis, in the event that you are unable to work.  

Different types of disability insurance

Your insurance provider can offer you two very different types of disability insurance policies – 

  1. Long-term disability
  2. Short-term disability

The difference between the two is significant. Short-term disability income insurance will pay you benefits sooner, and (as the name implies), for a shorter period of time than long-term disability income insurance.

Under the terms of your disability income insurance policy, you'll have to wait for a certain period of time after you become disabled before you can begin receiving benefits. Some policies (typically short-term policies) even offer two waiting periods - a shorter one for accidents, a longer one for sickness. Although policy terms can vary, short-term policies often begin paying after two weeks. Waiting periods under long-term policies are longer, ranging from 30 to 720 days, although a 90-day waiting period is most common.

If you suffer a disability, you'll receive benefits for the maximum amount allowable under your policy, or until you recover. By definition, short-term disability policies may pay benefits for up to two years, although most policies are drawn for three month, six months or twelve month periods. Long-term disability policies pay benefits for a far longer period, from a few years all the way up to age 65, or even for a lifetime. Assuming you only purchase one type of policy, and given life’s vagaries and uncertainties, long-term policies are often seen to be the wisest investment.

 

At Core Benefits Group, we know that you have questions and concerns regarding all types of insurance policies, including disability insurance, and we are ready to help. Please call us at 1-877-214-2969.

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