Is Disability Insurance for Everyone?

Everyone on the road needs to have car insurance. Everyone with a mortgage on their house needs to have home insurance. But other types of insurance aren’t so straightforward. Health insurance is a practical necessity, and commonly seen as a valuable investment. But what about disability insurance?

Less popular and less commonly discussed than other types of conventional insurance, disability insurance remains an important policy to consider. But does everyone need to have a disability insurance policy in place?

What Is Disability Insurance?

Disability insurance is a policy designed to financially protect you if you’re ever injured or ill in a way that prevents you from working. If you’re considered “disabled,” which is a status that can occur from a major injury, an accident, the onset of a debilitating illness, or even a condition like chronic pain, you can receive monthly payments to replace the income you would have otherwise gained by working.

Short-Term vs. Long-Term Disability Insurance

Short-term and long-term disability insurance often require separate policies. With short-term disability insurance, you’ll receive a temporary, full or partial replacement of your income for an injury that you’ll eventually recover from; for example, if you’re out of work with a broken leg, this policy will kick in.

Long-term disability insurance, by contrast, will cover you if you’re out of work for the foreseeable future – several months to years, or even for the rest of your life.

The Benefits of Disability Insurance

So what are the benefits of having a disability insurance policy in place?

  •         Financial protection. The obvious perk here is that disability insurance will provide you with financial protection if you’re ever disabled and unable to work. Even if you’re perfectly healthy now, there’s no guarantee that you’ll be healthy enough to work for the rest of your life; without a job, a disability insurance policy is the best way to ensure your financial stability in a worst-case scenario.
  •         Independence. In the United States, the Social Security Administration (SSA) oversees the Social Security Disability Insurance (SSDI) program. Through this program, you may be entitled to receive disability payments if you’re ever disabled and unable to work. However, the coverage of this national program is tenuous. Not only do you have to meet several criteria to qualify for this program, but you may also face a rigorous evaluation to determine whether you meet the organization’s standards for “disabled.” Disability insurance policies can keep you from becoming dependent on this program for financial protection.
  •         Peace of mind. You don’t have to be disabled to feel the benefits of disability insurance. Just knowing you have this policy in place can help you feel self-assured and grant you peace of mind that your financial future is protected.

The Costs of Disability Insurance

Disability insurance seems great, but what about the cost?

For most people, disability insurance is reasonably affordable. You’ll pay somewhere between 1 and 4 percent of your annual income on disability insurance by default, but there are a couple of scenarios that could have you paying even less.

If you’re currently young, healthy, and at low risk of being disabled, your costs will be at the absolute bottom of the spectrum. The sooner you buy disability insurance, the better.

If you buy disability insurance through your employer, you may qualify for a bundling discount. You may also find other discounts available, depending on your insurance provider.

Who Needs Disability Insurance?

So do you really need disability insurance?

Here’s something to consider: anyone can be disabled. Some people are at higher risk than others, facing specific health risks or working in high-risk industries. But it doesn’t matter who you are, where you work, or how careful you are in your daily life – disability is a possibility worth considering.

That said, some people should consider disability insurance more intently than others:

  •         Married individuals. If you’re married and your spouse is partially or fully dependent on your income, disability insurance could be even more valuable.
  •         Parents. If you have kids and you want to make sure you’ll be able to provide for them, even if you lose your job due to disability, this insurance is your best option.
  •         People in risky jobs. Some professions carry a higher risk of injury or disability on the job. In these cases, disability insurance is especially valuable.
  •         People without significant savings/wealth. If you have plenty of savings or personal wealth to carry you through a period of unemployment, disability insurance may not be as important to you.

Since anyone can be disabled without warning, anyone can benefit from having a disability insurance policy in place. Think carefully about your current risk profile and how your finances would be affected if you were suddenly unable to work; the right insurance policy could help you feel much more secure.

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