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Marla Hill, Senior Copywriter
You’ve probably heard of disability insurance, but do you really know what it means, how it works and if you need it? You should, as it may be may be one of the most critical types of insurance to have. Why? Disability insurance is insurance for your paycheck, providing a cash portion of your income if you can’t work due to an injury, accident or illness. If you think it can’t happen to you, think again: one in four of today’s 20 somethings will become disabled before age 67.1
If you work and rely on your income for bills and living expenses, keep disability insurance on your radar. Know the facts and consider:
It’s not fun, but it is important to think about how you might handle a worst case scenario financially if you’re not able to work. Do you have funds to deal with it?
If you’re like most people, you don’t. According to a 2017 GOBankingRates survey, more than half of Americans have less than $1,000 in their savings accounts.3 That’s not likely to last 34.6 months—the duration of the average long-term disability claim.1 In fact, most people—53%—don’t have savings that could cover expenses for just three months2.
Chances are you can’t build a sufficient emergency fund overnight. But you can get disability insurance. Know your options. There are two main types of disability insurance4:
Social Security If you qualify to receive Social Security Disability Insurance (SSDI), the average benefit amount in 2017 was $1,171 per month, and you could potentially receive less than this amount3.
But don’t hold your breath while waiting for disability from Social Security: There is usually a six-month waiting period before benefits begin and more than 1 million people currently await a hearing to see whether they qualify for disability benefits from Social Security, with the average wait nearly two years3.
Employer-Sponsored Many employers offer disability coverage that you can enroll in. Typically, employers pay for some or all of the cost of premiums. While that sounds great, make sure the coverage is enough to meet your financial needs. Also, remember, if you leave your job, the coverage doesn’t leave with you as your employer owns the policy.
Supplemental /Voluntary Not all employers pay for disability coverage but offer it as a voluntary benefit. This means you purchase and pay the entire premium for the coverage. If your employer doesn’t offer disability, or it’s not enough coverage, supplemental disability helps fill the gaps. Plus, if you ever become disabled and need to use the coverage, the benefits will be tax-free. And you own the policy—if you leave your job, your coverage moves with you (as long as you continue to pay for it).
Add your information into the Life Happens calculator to estimate what you need to maintain your standard of living if you became disabled.
Being able to earn a living is one of your most important assets. Make sure it has the protection it needs with the disability insurance that’s right for your needs.
References: 1 “The chances of becoming disabled are rapidly increasing; disability statistics.” Council for Disability Awareness, 3 July 2013, www.disabilitycanhappen.org/chances_disability/. 2 Huddleston, Cameron. “More Than Half of Americans Have Less Than $1,000 in Savings in 2017.” GOBankingRates, 19 Sept. 2017, www.gobankingrates.com/saving-money/half-americans-less-savings-2017/. 3 Ohlemacher, Stephen. “Social Security disability backlog tops 1 million; thousands die on waitlist.” The Denver Post, The Denver Post, 18 Sept. 2017, www.denverpost.com/2017/09/18/social-security-disability-backlog-thousands-die-waitlist/. 4 Marquand, Barbara. “Disability Insurance: Why You Need It and How to Get It.” NerdWallet, 20 Oct. 2017, www.nerdwallet.com/blog/insurance/disability-insurance-explained/.
Supplemental insurance policies are underwritten by Combined Insurance Company of America (Chicago, Il) in all states except New York. In New York, these policies are underwritten by Combined Life Insurance Company of New York (Latham, NY). All policies contain exclusions and limitations, see the policy for details.
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Combined Insurance Company of America (Chicago, IL Illinois) is a leading provider of individual supplemental accident, disability, health, and life insurance products and a Chubb company. With a tradition of nearly 100 years of success, we have an A+ rating by the Better Business Bureau and are one of Ward’s Top 50® Performing Life-Health Insurance Companies. Combined Insurance is also the number one Military Friendly® Employer in the over $1B revenue category for 2019 by VIQTORY. This is the company’s eighth consecutive year on the top 10 list and fifth consecutive year in the top 5—Combined Insurance was previously named the number one Military Friendly® Employer in the nation for 2015 and 2016. In New York, products are underwritten by Combined Life Insurance Company of New York (Latham, NY).
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