“Disability insurance can help protect your salary, if you are sidelined from work because of a health issue. Many individuals tend to skim over the details of this coverage during open enrollment, leaving them and their loved ones vulnerable.”
One in four adults will become disabled before reaching retirement age, according to the Social Security Administration.
CNBC’s recent article, “1 in 4 workers run into this career derailment, but you can protect yourself,” notes that about 20.1 million adults of employment age have suffered a work disability. Research published by the National Institutes of Health found the common causes to include back or neck problems, depression, anxiety or other emotional issues and arthritis or rheumatism.
When you're suffering from these issues and can’t work, disability insurance can help you bridge the pay funding gap. When going through open enrollment, some people’s patience also runs out after choosing their 401(k) solution, their health-care solution, or their health savings account and they forget about disability insurance.
You may also purposely avoid disability coverage, because of the cost. Disability insurance is frequently more expensive than term life insurance. However, think of it this way: the chances of missing six to nine months of work because of a car accident or other mishap are exponentially higher than dying prematurely, if you’re younger.
Long-term disability usually starts after three to six months and costs around 1-3% of a worker's annual salary. For most people who are covered through their employer, that policy typically replaces about 60% of their income. That may not be enough coverage, and you may consider purchasing another disability policy.
To see if you have enough disability coverage, look at your income, particularly the cash coming in and the cash going out. If you do become disabled, your costs could go up with additional child-care or medical expenses.
If you’re disabled, you don’t want to tap into your emergency or retirement savings. Look at how much you’re saving toward retirement, when estimating how much income you will need. Also keep in mind the number of people who’ll be affected, if your cash flow takes a dive.
If you decide you want more income protection, your employer may let you buy more coverage. If you’re self-employed, you may be able to get coverage through a professional association. You could also buy a policy on your own, but doing this on your own can be more expensive because group plans can spread the risk out among employees.