What would you do if you lose the ability to provide an income?
Some Facts:
Disability is unpredictable and can happen to anyone at any age
56 million Americans, or 1-in-5, live with disabilities. Thirty-eight million disabled Americans, or 1-in-10, live with severe disabilities. Disability is something many Americans, especially younger people, think can only affect the lives of other people. Tragically, thousands of young people are seriously injured or killed, often as the result of traumatic events. Many serious medical conditions, such as cancer or mental illness, can affect the young as well as the elderly. The sobering fact for 20-year-olds, insured for disability benefits, is that more than 1-in-4 of them become disabled before reaching retirement age. As a result, they may need to rely on Social Security disability benefits for income support. Disability benefits provide a critical source of financial support to people when they need it most.
Social Security disability payments are modest
At the beginning of 2015, Social Security paid an average monthly disability benefit of $1,165. That is barely enough to keep a beneficiary above the 2014 poverty level ($11,670 annually). For many beneficiaries, their monthly disability payment represents most of their income. Even these modest payments can make a huge difference in the lives of people who can no longer work. They allow people to meet basic needs and the needs of their families.
Self-insurance
You tap into your emergency savings, then optionally (depending on how long the disability lasts and the size of your emergency savings) your revolving debt accounts, and your retirement accounts.
- Pros: It saves you from paying a premium on LTD insurance every month for the rest of your remaining working years.
- Cons: It’s a riskier strategy than buying insurance. You gain immediate savings by not having to pay any premiums but risk financial hardship later if you become disabled. Should you buy your own policy or get it through work?
Should you buy your own policy or get it through work?
Clark has advised people to buy their own disability insurance policy if they make north of $200,000 a year. If you make less than $200,000 like most average Earthlings, then you want to take the group disability policy through your employer.
Too often people will skip buying disability insurance and think that Social Security disability will help them if needed. Social Security disability won’t help. It doesn’t pay a big benefit and it’s much more difficult to qualify for than a group policy provided through your employer.
Cara Lovenson is president of Plan Professionals, Inc., a licensed insurance consultant located in New York City. She can be reached at 212-697-2000, or by e-mail at cara@planprofessionals.com. Her Web site is planprofessionals.com
