Disability Insurance

The second most important thing:

This is, we believe, the second most important insurance once can buy. Why?

What are you insuring with your home and auto? Your the rebuilding of your house, the protection of your assets from a lawsuit, and the replacement of your vehicle in case of damage.

With disability, you are insuring your paycheck.

Imagine you had a box with a little lever on the side.  Once a day you could turn that lever and money would come out.

Would you insure that? Would you want to replace that money that came out each day?

That box is you

You go to work each day, and you turn that crank by working. A few times a month money comes out of it, and you see it in your bank account.

We insure our lives because without those, what we provide to those we love disappears and they have to go through real expense and trouble to replace it.

Disability is insurance to maintain your standard of living, while you can’t work.

Many people believe worker’s compensation will cover them when they can’t work, or that unemployment insurance will pick up the slack. They’re wrong. Those only apply to on the job injuries or sicknesses, and those are often difficult to claim on and take a long time to get.

What disability insurance does

Disability insurance insures your paycheck up to a certain amount. You are able to elect a maximum monthly benefit based on your income. This is usually about ⅔ (66%) of your monthly income after taxes.

Why that amount? Any more and you’re effectively encouraging people not to go back to work.

Elimination period

Disability insurance starts paying out after what is called an elimination period. That can be as little as 0 days for injury and 7 days for illness. This means your first day of being out of work due to injury would be paid and the eighth day of illness would be paid. Some policies see the 0/7 elimination, some see a 7/14, others see a 30/30. Either way, the first number is always the elimination period for injury, the second for illness.

Elimination period options are usually longer for policies bought individually, rather than through your work. Also, shorter elimination periods often cost more money.

Benefit period

Disability insurance will pay for up to the length of the benefit period.

If you have a 120 day benefit period and are injured for 150 days, you’ll only have those 120 days paid out and be short 30 days. A 180 day benefit would cover those 150.

Let’s say there’s something longer, though. One in eight workers will suffer a disability of 5 years or more during their working careers. This is where long term disability would come in.

What’s my risk?

According to the Council for Disability Awareness:

  • A typical female, age 35, 5’4″, 125 pounds, non-smoker, who works mostly an office job, with some outdoor physical responsibilities, and who leads a healthy lifestyle has the following risks:
    • A 24% chance of becoming disabled for 3 months or longer during her working career;
      • with a 38% chance that the disability would last 5 years or longer,
      • and with the average disability for someone like her lasting 82 months.
    • If this same person used tobacco and weighed 160 pounds, the risk would increase to a 41% chance of becoming disabled for 3 months or longer.
  • A typical male, age 35, 5’10″, 170 pounds, non-smoker, who works an office job, with some outdoor physical responsibilities, and who leads a healthy lifestyle has the following risks:
    • A 21% chance of becoming disabled for 3 months or longer during his working career;
      • with a 38% chance that the disability would last 5 years or longer,
      • and with the average disability for someone like him lasting 82 months.
    • If this same person used tobacco and weighed 210 pounds, the risk would increase to a 45% chance of becoming disabled for 3 months or longer.

Smoking, less healthy lifestyles, and more exposure to physical injury increases the risk of disability.

Basically, one person every second in this country becomes disabled. One in four people will experience a disability in their working career. If you live from paycheck to paycheck like so many Americans, this can help keep you from getting evicted or having your phone or gas turned off. If you have savings, this can help keep them and, down the road, keep everything turned on.

Where Bow Tie Financial comes in

None of us knows, for sure, what lies ahead. Bills, taxes, and some problems, sure.

That’s all we know, though.

Our goal, with disability insurance, is to help you manage your risk and budget to make sure that an off-hours problem won’t destroy your entire life. That your standard of living will be able to be maintained or, at the least, picked up from where you left off when you start working again.

We can help you sort through the benefit and elimination periods, select the safest benefit amount, and help you know more about the many other options there are.

Contact us for a quote today.

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