“Protecting your paycheck is a crucial consideration. Don’t underestimate the impact an income-disrupting injury or illness could have on your retirement plans.”- Gary Stewart
Is your paycheck protected?
An essential asset most Americans possess is the ability to work and earn a paycheck. So, what happens if you lose your ability to make a living, even temporarily?
If you think becoming disabled sounds farfetched, you should consider the fact that by Social Security Administration estimates, one in four Americans age will have a 90 day or longer disability before reaching retirement age.
Knowing this, it makes sense that many of us could benefit from adding disability insurance to help us safeguard our income source against the impact of losing work due to injury or illness.
Sadly, though, 6 out of 10 Americans have no disability coverage in place. For one thing, most people tend to believe that life-disrupting accidents or illnesses will never happen to them. Or, they mistakenly think that most injuries resulting in a disability occur at work and are covered by an employer’s Workers’ Compensation insurance. Both these assumptions can cause people to avoid purchasing disability insurance.
Both are also wrong.
What is disability insurance, anyway?
The term “disability insurance” is a bit of a misnomer and a source of confusion for working adults.
Disability conjures up images of severe, life-changing injuries or chronic illnesses instead of the more typical less-serious, and treatable medical conditions. For example, disability policies often provide coverage for pregnancy, mental health, digestive disorders, or circulatory injuries.
Disability insurance (DI) is a form of paycheck protection that kicks in if a covered disabling medical event results in you being off work. Several types of DI are available, including short-term disability insurance (STD), long-term disability insurance (LTD), and SSDI, which is part of your Social Security benefits. You should consult a disability insurance specialist to help determine which one will best fit your needs now and in the future.
Myths about disability insurance
Many working adults forget to add disability insurance. This omission is usually because they believe common DI myths such as:
- Disabled people are almost always older males or “blue-collar” workers. Working women under the age of 50 commonly have no disability insurance, saying they don’t own it because they are healthy, female, and don’t feel they need it. However, insurance company data indicates that people of all ages and professions have statistically about the same chance of having a paycheck- disrupting injury or illness. 3 in 10 American households have reported at least one disability leave in the past ten years, with a majority reporting a devastating financial impact as a result.
- Disability insurance only covers “catastrophic” injuries or illnesses. People often make assumptions about what qualifies as a disability. They wrongly believe the term is restrictive and applies only to catastrophic conditions. Many do not realize that income disruption typically arises from less severe, more common injuries and events such as pregnancy, back pain, depression, and digestive disorders. An insurance industry analysis of disability claims shows “mental health,” including substance abuse issues, is one of the fastest-growing diagnosis categories in the past five years.
- Disabilities mostly happen on the job. Many working adults believe that disabilities are mainly job-related and, therefore, covered by workers’ compensation or Social Security Disability Insurance (SSDI). The reality, though, is that only 5% of all disabling accidents or illnesses occur at, or are related to, work. This means that neither workers’ compensation nor SSDI covers the majority of disabilities.
Bottom line: If you depend on your paycheck to cover living expenses and provide you with retirement savings, it’s probably worth asking your insurance professional about disability insurance.