You insure your most valuable assets like your home, your car and your life. Most people would agree that they’re worth protection; however, disability income (DI) insurance is something people tend to be less certain about. They’re not sure if they really need it, or if it’s worth the cost. So, is it? There’s no cut-and-dried answer, but there are some strong arguments to be made in favor of DI.
What Are the Chances You’ll Need It?
When you think about the kind of disability that could keep you from working, usually the first thing that comes to mind is a car accident or other catastrophic injury — in other words, something that could happen, but most likely won’t.
In reality, the most common cause of disability is illness, not accidents or injuries. Arthritis, back pain, neurological problems and cardiovascular illnesses are all more common than injuries when it comes to disability claims. And, disabilities are more common than you might think. In fact, one in four 20-year-olds will become disabled before they reach retirement age, according to the Social Security Administration. You probably know someone who’s had to take time off from work for medical reasons, even if it’s not permanent.
Can I Afford It?
When you’re already paying for other kinds of insurance — home, auto, life, etc., — it’s hard to think about buying more. But a good way to frame it is what DI costs vs. what the benefit would be if you used it.
Here’s a hypothetical: Say a 30-year-old man, taking home $56,250 a year buys a disability insurance policy that costs him $929 per year. (By comparison he could be spending $985 a year on a daily coffee, assuming an average price of $2.70.5)
If he becomes totally disabled, after a 90-day waiting period he could receive $4,050 a month over 12 months, replacing about 86 percent of his pre-disability, after-tax income — and hopefully allowing him to keep up his coffee habit.
There are, of course, some limitations and eligibility requirements for DI. So in the end, it’s a matter of whether you feel like the benefit you could receive outweighs the cost of premiums and the uncertainty that comes with not having any coverage at all. Costs and benefits vary from policy to policy.
Protecting Your Most Valuable Asset
With any luck, you’ll never have to deal with a disability that keeps you from being able to work. But it’s a good idea to have a plan in place, so that if you ever did become disabled you could still cover your expenses and provide for the people who count on you.
Give Jim a call today to start discussing your options for paycheck protection!
Jim's focus: Insurance Strategies, Business Owners, Military,
Group Benefits & Business Succession Planning