Today Unique Estate Law brings you a post from Jay Dworsky explaining disability insurance. Please also see Jay’s prior series on Life Insurance and non-traditional families.
Disability insurance by definition replaces lost income due to a sickness or injury where you are unable to work. Sometimes people are able to work through a partial disability at their current job, decrease hours or find other suitable work until their situation hopefully turns for the better. Nonetheless, people must pay their bills, keep a roof over their head and feed their families throughout the disability.
According to the May 2000 Norton Bankruptcy Adviser, 326,441 families that filed for bankruptcy protection in 1999 identified an illness or injury in their family as the major reason for the bankruptcy. That means 1 in 4 debtors in 1999 were attributed to a disability.
Still not concerned? According to the US Housing and Home Finance Agency only 3% of home mortgage foreclosures are due to a death of the breadwinner. 48% of all foreclosures are due to a disability.
The corporate employee with benefits
A group disability policy at your average corporate employer will many times will pay up to 66% (pre-tax) benefit for a long-term disability, if you are determined medically unable to work your current job according to the definition in the policy. Many times the employer pays the employee’s premium as part of their total benefits package (in lieu of paying a higher salary). At the end of the day, receiving a 66% (pre-tax) benefit you would experience living on half your normal income while laid up at home. Is that enough? Many times corporate employees buy supplemental disability insurance because living on half their income for any length of time would be devastating.
The small business owner/employee/entrepreneur without benefits
Where do I buy disability insurance (or income protection)? Your local insurance advisor can help you attain a policy that will cover the amount of income you need in the event of a partial or total disability. This type of policy pays an after-tax benefit. These policies have options to increase benefits for keeping up with cost of living.