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Protecting your Livelihood with Disability Insurance

What You Need to Know About Disability Insurance

Studies have shown that a person has a high chance (about 80%) of being disabled in the span of his work life. Statistics also indicate that over 30 million people suffer from a disability-causing injury every year. A majority of adults in the U.S. do not have private and long-term disability insurance that can serve as income replacement when they get sick and unable to come in to work for a long period of time. Those who have coverage may possibly not have enough.

Whatever the odds may be that workers will be disabled; there is a real need for disability insurance. When you start shopping for private disability insurance, you have to evaluate your personal circumstances and assess the likelihood of you being injured throughout the course of your work life. This should give you a hint on what type of disability insurance is just right for you.

Looking for Adequate Coverage

The disability statistics will indicate that the numbers for white-collar workers are way lower than for assembly line workers. If you do not suffer from any chronic conditions, eat properly and do not smoke then you significantly lower your chances of falling into a disability that will interfere with your work or livelihood.

Many people lie about their physical condition and about being disabled in order to get a lower premium. Most people who purchase their own policies would be inclined to actually use them. Company-provided disability coverage seems adequate enough but workers would have to remember that the insurance may not be enough to replace all of their income. The coverage is only for the duration of the employment and will be taxable income.

While some employers provide disability coverage to their employees, the latter group should remember that (1) it is considered taxable income if the employer pays the premium; (2) it may not replace all of their income; and (3) it may not last forever.

Other Coverage

The disability coverage provided by Social Security is quite small and claims take forever to be processed, particularly if you are appealing a rejected claim. The eligibility rules are stringent. Worker’s compensation on the other hand will only cover your disability costs if you incurred the injury on the job. The irony of this is that most of the disability claims are not the result of work-related injuries.

Getting Coverage

Finding the right fit in terms of disability insurance can be a daunting and confusing task. You will likely find many leads over the Internet but there are just not enough insurance salesmen who can give you a quote from up to four insurers so you can compare costs and coverage. There are a number of websites where disability insurance agents and brokers converge to impart knowledge to the general public. You can log on to one of these sites to look for an agent in your area. You should check out their online profile as well as their activities to get a feel of what they would be like and if they can help you in your quest for the right disability insurance for you.

Watching Out for Pitfalls

You should educate yourself on the many ways insurance companies can limit your claim. A common scenario is when insurance companies force their customers to get back to work doing any job that they can perform and not necessarily the one you had before your disability. Many workers purchase the own occupation kind of coverage that pays their claims if they are unable to perform the tasks involved in their old work.

The Questions You Should Ask

Perhaps the first thing you need to settle is the percentage of your income that your insurance will replace should you get sidelined due to disability. Will your insurance provider be able to cover your bonuses and commissions on top of your base salary? You should also consider how your 401(k) and pension will be affected by your disability. Other issues you need to know about are taxation and the impact of inflation on your payout. In the end, having disability insurance would be ideal if you have the resources to purchase one. For a few hundred bucks you are assured that you have income replacement if you cannot come to work.