Senior Associate Financial Planner Michael Murkins provides insight as to why disability insurance should be a part of your risk management strategy in your comprehensive financial plan.
Here are a few statistics about workforce disability according to National Underwriter:
- Three in 10 workers entering the workforce today will become disabled before retiring.
- At age 42, it is four times more likely that you will become disabled than die during your working years.
- In the last 10 minutes, 498 Americans became disabled.
While these statistics might startle, disability insurance is meant to protect your income in the event you are unable to work due to a disability.
Disability insurance comes in two forms:
- Short-term disability policies typically have an elimination period from 7 to 30 days, with 14 days being the most common. This is the amount of time that you would wait before payments would start post-disability. The benefit period, or the amount of time you would receive benefits, can last up to a year. Typically, this type of policy would pay benefits for three to six months.
- Long-term disability insurance picks up where a short-term policy left off. These policies may have an elimination period of 90 days or more. Once benefit payments begin from this type of policy, they may last a few years or until a set age, such as age 65.
Employer Disability Coverage
About a third of working Americans has some form of disability coverage through their employer. Even those with employer provided coverage are often under-insured. As a rule of thumb, you should aim for a benefit of 70% of your gross income. However, this number can vary depending on your unique situation.
One important note is that Social Security also provides a disability benefit, but the criteria for claiming this benefit can be stringent. It is a conservative approach to plan for a scenario where you do not qualify for Social Security disability benefits.
If you would like to review your risk management plan to ensure that you have adequate disability insurance, we recommend contacting your financial planner at Syverson Strege at 515-225-6000.
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