What would you do if your last paycheck was your last?

This isn’t something we ever think about, but it should be. We are taught, encouraged, and even legally obligated to insure our homes; our cars; our businesses; our cell phones. But we never think about insuring our paycheck. We use insurance to protect these assets but protect our most important asset. 

What is your biggest asset?

  • Your House? 
  • Your Retirement Fund?
  • Your Life Insurance Policy?

Your ability to make an income is your biggest asset. Without this, you lose everything else. You are the true asset, not this stuff. We buy disability insurance for the same reason we buy life insurance; to replace a lost income. 

Many folks buy life insurance, but do not buy disability insurance. Do you know the difference between disability and death? The bills stop at death, but if you become disabled, the bills can keep on coming. 

Yet, too often people insure their stuff, but not themselves.

WHY? Is it because we are not forced to? Is it because no one has ever asked us about it? Is it because we are invincible and nothing will ever happen to us?  

Long-Term Disability

  • Protects your income if you need to miss work for longer than three to six months.
  • It Typically covers up to 80 percent of your income.
  • The time your coverage pays benefits will range depending on your policy.
  • It can be for a specific period — ranging from two to five or ten years — or until Retirement Age
  • The waiting period for most LTD policies is three or six months 
    •  So, you will need a plan to cover costs before the payments begin (usually this time is covered by your STD plan or your savings.) 

**If your employer pays your STD or LTD premiums, your benefits are taxed

Short-Term Disability Insurance

  • Plans usually protect your income for between three days and six months
  • Although some policies offer coverage for up to two years.
  • Short-term plans typically replace between 60 and 70 percent of your pay
  • When you choose a plan, be aware of the waiting period, also known as the elimination period. 
    • This is the time between you being diagnosed with an illness, injury, or having a baby, and receiving a payment

**Depending on how it is set up through your work, this may be taxed

Different  coverages for Disability Insurance:

  • Loan Disability: Provides Relief on loans when you are unable to work
  • Student Loan Disability
  • Buy/Sell Agreements and Buyout Agreements
  • Allows a partner to have the resources to buy out another partner who has become disabled
  • Personal Disability: 
    • Covers your personal Income
  • Business Overhead 
    • Covers Business Overhead expenses such as salaries, rent, and operational expenses if a business owner becomes disabled

Disability Insurance

The Most Common Reasons for Long-Term Disability Claims

  • Musculoskeletal disorders (29%) – arthritis, back pain, spine/joint disorders, etc
  • Cancer (15%)
  • Pregnancy (9.4%)
  • Mental health issues including depression and anxiety (9.1%)
  • Injuries such as fractures, sprains, and strains of muscles and ligaments (9%)
  • Heart Attack, Diabetes, Back pain, injuries, and arthritis are also significant causes.
  • Most are not work-related, and therefore not covered by workers’ compensation.
  • Lifestyle choices and personal behavior that lead to obesity are becoming major contributing factors.
  • https://disabilitycanhappen.org/disability-statistic/

Disability Facts

  • More than one in four of today’s 20-year-olds will be out of work for 12 months or more for a variety of reasons before they reach normal retirement age.
  • This includes common health conditions such as knee, shoulder, or back injuries, cancer, heart problems, or depression.
  • Over 37 million Americans are classified as disabled; about 12% of the total population. More than 50% of those are in their working years, from 18-64”
  • One in eight workers will be disabled for five years or more during their working careers”
  • 90% of new long-term disability claims are caused by illnesses rather than accidents. Fewer than % are work-related”
  • A 2014 study of consumer bankruptcy filings identified the following as primary reasons:
    • medical bills (26%)
    • lost job (20%)
    • illness or injury on part of self or family member (15%)
  • A 2013 study of bankruptcy filings in Washington state found that cancer patients were 2.65 times more likely to go bankrupt than people without cancer, with younger (under age 50) cancer patients having the highest rates of bankruptcy
  • https://disabilitycanhappen.org/disability-statistic/
  • https://disabilitycanhappen.org/disability-statistic/
  • Most Americans, don’t have enough savings to cover three months of living expenses or to pay an unexpected $400 bill without having to take out a loan or sell something. 
  • This is where salary protection insurance comes in. Disability insurance pays you a portion of your income when you need to miss work for as short a period as a few days to as long as you reach your retirement age.
  • No other insurance product helps to cover your day-to-day expenses in this way. Health insurance covers medical bills. Worker’s compensation only pays for injuries that happen in the workplace. Disability insurance protects your income.

Common Mistakes

  • Not reviewing and updating your policy
    • New Job or Pay Increase
  • Improper Tax Filings
    • Work pays for your policy with Pre-tax Dollars
  • Not getting enough Disability Coverage
  • Getting the Wrong kind
    • Own Occ Vs Any Occ