Insurance: security, protection, coverage – overall, a comforting word that we welcome, especially in terms of our financial lives. There are numerous types of insurances in the financial world, and the variety of options can be daunting at times. Disability insurance is one type under the insurance umbrella that is often overshadowed by its peers, life and health insurance, despite it being just as important of a part in terms of your overall financial plan.
Disability insurance provides income in the event a worker is unable to perform his or her work and earn money due to a disability. There are many different organizations that provide various types of disability insurance, and every type of disability insurance has specific rules and stipulations. The two main forms of disability insurance are short-term and long-term. Short-term disability insurance policies offer a worker a portion of his or her salary if he or she is unable to work for a short period of time, typically between three to six months, while the long-term counterpart covers an individual when he or she is unable to work for six months or more. With disability insurance, you will receive a monthly check that replaces all or some of your income for the time period associated with your policy.
Both short-term and long-term disability policies require that the filer must be disabled for a specified period of time before he or she qualifies to begin receiving benefits. This period of time is known as the elimination period. If and when a person becomes disabled, he or she must wait until the elimination period is over before beginning to receive benefits. If the individual is able to work before the elimination period is over, he or she will not be eligible to receive the insurance benefit. The overall criticisms of disability insurance policies involve the waiting period before actually receiving the benefits, the time limitations for how long you can receive the benefits, and the potentially high premiums associated with the policies.
Your future income and the assurance that this income will always be there for you is the greatest asset for you as an individual and as a provider for your family, if applicable. Every plan you make today and in the future relies on the assumption that you are earning money and will continue to do so. This reality is why it is so important to protect your income and ensure you are prepared if this income is ever at risk due to a scenario that is out of your control. It is primarily for this reason that people choose to have disability insurance. People often naively assume that disability insurance only applies solely to accidents and injuries; however, a majority of disability insurance collectors involve illnesses and other non-injury related scenarios, such as pregnancy and associated complications, cancer, and back pain, to name a few.
The most important benefit of disability insurance is that it allows an individual to keep up with his or her essential living expenses without jeopardizing his or her financial plan. It provides people with the financial security to pay the bills and put food on the table in light of an unpredictable and potentially devastating life event. So, a quick answer to the question, “who needs disability insurance?” If you work, have dependents and family members who rely on your income, and feel you would be unable to go more than a few months without a paycheck, you should strongly consider making a disability insurance policy a part of your holistic financial plan.
We often underestimate how dependent we are on a steady income. Even if you don’t consider yourself living from paycheck to paycheck, consider how quickly your finances may dry up if you suddenly find yourself unable to work for an extended period of time. Without disability insurance, you may be assuming unnecessary financial risk that involves falling behind on your monthly bills, not being able to confidently cover your daily expenses, and derailing your big-picture financial plan. Knowing that these financial risks can be easily averted given proper financial security, you may find disability insurance to be an invaluable financial and life decision you make for not only yourself, but for your loved ones too.
Questions and/or interested in how this applies to your financial life?
Email us here: info@afsfinancialgroup.com.