I help many small business owners and independent contractors put benefits packages together. One of the benefits that almost everyone considers, especially if they have children is Life Insurance. There is nothing wrong with having life insurance and for most people I recommend it. However the benefit that most people don’t think to add is Disability Insurance.
Your most important asset is not your home, your car, your jewelry or other asset. It’s your ability to earn a living. Think about it: All of your plans for the future-from buying a home, to putting your kids through college, to building a retirement nest egg-are based on the assumption you’ll continue to earn a paycheck until you retire. But what happen if those paychecks stopped? That’s where disability insurance comes in. It provides an income to you and your family if you are unable to work because of illness or injury.
Most people do not consider disability insurance for two reasons
1) They don’t think something will happen to them
2) They think they will be covered through Social Security, state-mandated Worker’s Compensation or employer provided group plans.
There are some holes in taken this approach. For one, you are a lot more likely to become disabled during your working career than you are to die. Over 1 in 4 workers will become disabled before they retire. Only about 39% of the 2.1 million workers who applied for Social Security Disability Insurance benefits in 2005 were approved. And those who are approved get an average benefit of just $1,064 per month – hardly enough to replace your income. Worker’s Compensation covers only work-related disabilities, but according to the National Safety Council, 73% of disabling accidents and illnesses are not work related. Only 36% of full-time employees have access to long-term disability insurance through their employers.
My recommendation: explore your options. If your employer offers disability coverage, take the time to find out if the coverage would be sufficient to meet your income replacement needs in the event of a disabling illness or accident. Another option is to purchase coverage on your own.
May is Disability Insurance Awareness Month, the perfect time for a disability insurance “reality check.” Take this opportunity to make sure you’d be OK financially in the event that a disability keeps you out of work for an extended period of time.
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