Disability Income Protection: Who Needs It?

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If you are not retired or independently wealthy, chances are you work every day to support your lifestyle and perhaps that of your family.

How long could you go without your normal paycheck before you would start to feel the financial pinch – two years, six months, 90 days, two weeks?

Most consumers tell me they could go between two weeks and 90 days without a paycheck. In short, their paycheck is perhaps their most valuable financial asset. How about for you: how important is your paycheck to your daily lifestyle? How long would it take for you to feel the pain of not having income?

Common Excuses

If income is so important, why then do so many people have a hard time with spending money to personally protect their income from the threat of disability? I will go over some of the most common excuses below:

I am in a Low Risk Occupation

Many attorneys, CPAs and engineers – my frame of reference for white-collar clients – have a hard time visualizing how a physical impairment could impact their ability to work. It is true that they could still do their work with some physical limitations.

Unfortunately, we cannot pick our disabilities, and indeed many types of impairments can impact one’s ability to do even white-collar work:

 

•    Chronic pain

 

•    Loss of sight, speech or hearing

 

•    Mental incapacity – including cognitive impairments from accidents and other trauma

 

•    Conditions that cause fatigue or otherwise interfere with concentration

 

If you become the statistic and suffer a condition that limits your ability to perform your occupation at full capacity, what will be the consequences for you and any dependents if your income stops or is greatly reduced?

I am Young and Healthy

Most young consumers run the risk of not having much in the way of savings, so they are probably the least capable of enduring the loss of income. Consider a 26-year-old who at age 18 had suffered brain damage in an accident at work. Her sole source of income was $700 a month from Social Security. Her family members could not deal with the personality disorders that accompanied her injuries, and thus provided little to no help.

My suggestion for young people who are not ready to spend much for income protection because of their good health or low budget: Follow the advice of a disabled consultant interviewed by The Wall Street Journal to “buy as much disability insurance as you can, while you can.”

While healthy, obtain a starter policy with the best possible company and load up on what are called future increase options (no medical or health questions required for future increases). As a disability insurance manager for one of the nation’s leading disability insurance carriers, I see numerous applications for disability insurance declined or heavily modified from the original request – either with ratings or what we call exclusion riders (bad back, mental disorders, etc.). Waiting until your health breaks down to realize you “need” disability insurance is simply not wise and may have devastating consequences.

Disability Insurance is Too Expensive

What can you least afford to pay for income protection, two percent to five percent of your income while healthy and working, or 100 percent of your income when sick or hurt and not working?

My Business Can Run Itself without Me – I have Great Employees


Before I discuss disability with small business owners, I will usually ask how long they could take a vacation before feeling a need to get back to the office. Most will tell me, two to three weeks max. Why then, could the business somehow run without them if the cause of the absence were a disability?

Business owners work hard to get their businesses successful and profitable. There is no guarantee that the business will continue running well during an extended absence, especially one due to disability.

A common contingency plan is to try to sell their businesses. However, a business in trouble due to a disabled owner is rarely worth what it could have been.

Summary

If you are working today to support a lifestyle, you need disability income protection and you need to make sure any coverage obtained is right for your situation. This is not an area to go cheap. This is not an issue of good health, young age or low-risk occupation. Those factors will, however, help to lower your cost for coverage.

Henrik Jahn, Central Financial Services, 141 NW Greenwood Ave #201. Office 541-382-8949 ext. 113, centralfinancial.us.

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