Do You Need Disability Insurance?

Most Americans can’t imagine a situation where they or a loved one would ever become disabled. Almost 65 percent of wage-earning Americans believe there is a two percent or less chance of becoming disabled for three months or more during their entire working career, according to the Council for Disability Awareness (CDA).

On the contrary, your chances of becoming disabled during your employment are grossly higher than what the general population believes. The Social Security Administration estimated in 2013 that nearly 30% of working Americans would become disabled for some period of time before their retirement.

Furthermore, the average individual disability claim lasts for more than 2.5 years, according to the CDA. Some may believe they can rely on workers compensation to suffice while out of work. However, almost 90% of disability cases are not work related and not covered by worker’s compensation, according to LIMRA’s study.

Types of Disability Coverage

It is important to review the various types of disability insurance with a qualified advisor to determine which is best for you. Here are some general examples.

Individual Disability

Premiums and benefits may vary considerably between companies, occupations and states. In general, premiums are higher for policies that provide more monthly benefits, offer benefits for longer periods of time and the start of benefit payments of in relation to the claim.

Group Disability

Members would receive a monthly disability income benefit, should an illness or accident prevent the member from work. Benefits are usually limited to a specified length of time, and the maximum monthly income benefit is usually no more than 50-60% of earnings prior to the disability.

High-Limit Disability

High-limit disability insurance is designed to keep individual disability benefits at 65% of income regardless of income level.

What’s Next?

Planning for a short and long-term disability is a necessity that most Americans seemingly overlook. The potential loss of income from an injury or illness may threaten a lifetime of savings. Additionally it can place a significant emotional and physical burden on spouses and family members that many would like to avoid.  Moreover, planning for this type of situation is going to be more expensive the longer you wait. Generally, at younger ages you are more likely to qualify for good health discounts and lower annual premiums. You are never going to be as young and healthy as you are right now.

This information is not intended to be a substitute for specific individualized tax advice. Tax laws and provisions are subject to change. You are under no obligation to use the services of Crest Tax Pros, and may choose any qualified professional to provide tax services. Crest Tax Pros and their services are not affiliated with LPL Financial or Virtus Wealth Management.