I am aware disability insurance is as about as exciting as watching paint dry. However, it is a topic that needs to be discussed just like taxes, your mortgage or health insurance.
Disability insurance protects you from the loss of your paycheck. Have you ever thought about what would happen if you couldn’t work due to unexpected injury or illness? Think about it, without a paycheck you have no way of paying your mortgage, health insurance premiums, saving for retirement or providing for your family. Pretty significant, right?
Some employers offer disability insurance, but the typical group disability plan only covers 60 percent of base salary, excluding bonuses, commissions or incentive pay. In addition, the benefits are usually taxable if the employer is paying for the cost of the insurance. As a result, after taxes the benefit is more like 40 percent of base salary only. Could you live off 40 percent of your monthly base salary? With 71 percent of Americans living paycheck to paycheck, I doubt taking a 60 percent pay cut would cover your current lifestyle costs.
The reality is no one ever wants to pay for insurance, no matter what it is for or how little it costs. You are never going to use it anyway, right? Let's hope not, but the statistics surrounding disability tell us that one out of every four of today's 20 year-olds will become disabled before they retire. A 20 year-old earning $30,000 year will have a lifetime earnings of over $6,854,211. That is an enormous financial risk to take if you decide to leave your money in the bank instead of investing in a disability insurance policy. To find out what your lifetime earnings will be visit http://www.lifehappens.org/lifetime-earnings-calculator/.
Bottom line, purchase a personal disability insurance policy. If you currently have a plan in place with your employer you will want to supplement that coverage with additional disability protection. If you have no coverage, give yourself the gift of peace of mind knowing you and your loved ones are financially secure should you become too sick or hurt to work.
If you would like a review of your current disability policy or have additional questions on how to start the disability insurance planning process, please contact me at 952-641-5204 or at firstname.lastname@example.org.