Most individuals spend plenty of time finding ideal rates on home and auto insurance—but what about disability insurance, which could replace lost income if you ever found yourself injured or sick and unable to work?
This is perhaps the most ignored of all insurance types, yet for many investors it is an ideal way to safeguard against financial ruin: An otherwise sound retirement plan can be sunk if disability leads to lost wages or diminished earnings.
What’s more, disability is more common than you might think, with a third of all women and a quarter of all men sustaining disabilities that make them leave work for 90 days or more, at some point over the course of their life.
Why Disability Insurance Goes Ignored
But why is it that so many individuals neglect disability insurance? One reason is that it is indeed an out-of-pocket expense, and can cost hundreds or even a few thousand dollars each year.
Another big reason why it is ignored: A lot of people mistakenly assume that they get disability coverage from their employer. It is true that a handful of states require employers to offer disability insurance, but the vast majority do not. Disability insurance should never be presumed.
Two Types of Insurance
Likely the main reason why people neglect disability insurance is that they simply aren’t aware of the different benefits that can be offered.
To begin with, understand that there are two basic types of coverage. First, there is short-term disability insurance, which usually replaces 80 percent or more of your gross income for a short span of time; the policy may state as short a timeframe as 60 days or as long as 180. This is usually used for a post-surgery recovery period.
Should a short-term policy run out and you still find yourself out of work, a long-term policy can kick in, though usually with a much abbreviated benefit—often 60 percent of your gross salary. The good news is, long-term coverage can last for many years.
Choosing Your Coverage
Of course, there are many specific insurance products that offer different premiums and different levels of payout, plus different terms and applications. It is important to do some research and figure out which policy is best for you; start by getting a baseline of your expenses, month to month, and determining how much you would actually need your policy to cover.
Also be sure to get insight from your financial advisor, who can illuminate the ways a disability policy can work alongside the rest of your investment portfolio. To make an appointment with Stonepath Wealth Management, please call or e-mail today.