Protecting Your Earning Power with Disability Insurance
Most people agree that it makes sense to insure valuable possessions like their home and car. Yet many of these same people neglect insuring their most valuable asset — their ability to earn an income.
When you’re healthy and able to work, it’s easy to assume your life won’t be interrupted by disability. However, according to a 1984 study published by the U.S. Department of Health and Human Services, one in three people between the ages of 35 and 65 will suffer a long-term disability (more than 90 days) during his or her working life.
But even if you suffer a long-term disability, your inability to work may not mean a fight for your economic life. Disability income protection is a way to keep you financially secure in case the unexpected happens.
Who needs disability insurance?
Simply put, anyone who relies on a paycheck to meet monthly expenses needs disability insurance. If you’re among the fortunate and have saved enough to live comfortably in retirement, you can probably opt out of this coverage. But for growing families with heavy debt loads and little savings to fall back on, protection against loss of income is especially important.
Government program protection
Some workers think government disability insurance programs adequately cover them if they become disabled. While Social Security is one source of disability coverage, the rules are strict, and according to the Social Security Administration more than one-half of first-time applicants are denied benefits. Others may assume that workers’ compensation is all they need. Unfortunately you are only eligible for benefits if your disability is a result of a work-related illness or injury.
Employer provided coverage
One of the most economical ways to obtain disability coverage is through group plans offered by some employers. Among working Americans with disability protection, many are covered through an employer’s plan. Group coverage typically pays 60 –70 percent of your current base income (does not cover bonuses, commissions, etc.) and waiting periods will vary from plan to plan.
Other coverage options
If you aren’t eligible for an employer-sponsored disability plan or wish to supplement your employer-provided coverage, you can purchase an individual disability policy. Although they typically cost more, most individual policies also offer more generous benefits than group policies. Benefits may include shorter waiting periods and the ability to maintain uninterrupted coverage if you change jobs.
Choosing individual protection
When shopping for disability insurance, consider these points to maximize your dollars:
Benefit period. Disability policies generally have two different benefit period options — one that covers disabilities of five years or less and one that provides lifetime benefits. The longer time period you select the higher the cost of the premium.
Waiting period. You can reduce your policy cost by increasing the length of the waiting period which is the time you must wait before you begin collecting benefits.
Residual benefit. A residual benefit is a good way to protect yourself against partial disabilities. This inexpensive form of coverage provides you with the difference between your pre-disability income and post-disability income after you have experienced a disability.
Own-occupation coverage. While this is one of the most expensive forms of coverage, it protects you if you are unable to work in your present occupation. Otherwise, your insurer won’t pay you unless you can’t work at all.
Non-cancelable contract. This means the company must insure you as long as you make the premium payments. Your policy can’t be canceled for any reason and your premiums can’t be increased.
Protection planning is an important component for anyone who is managing his or her personal economy. As with any issue that affects your long-term financial security, it’s best to consult a qualified financial advisor before making your disability insurance coverage decision.
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American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer.
This communication is published in the United States for residents of North and South Carolina only; and this advisor is licensed only in the states of North and South Carolina."
Roy P. Janse
Financial Advisor
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American Express
Financial Advisors, Inc.
IDS Life Insurance Company
1150 Haywood Road
Greenville, SC 29615
Phone: (800) 554-0805 x141
Fax: (864) 234-7139
