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If you had only one insurance coverage it should be disability income insurance. This coverage is available for as little as $10 per month sand should not be overlooked. Medical care will always be provided in some form to those without insurance, uninsured personal property losses can eventually be replaced but income lost due to sickness or injury is typically irreplaceable. Most bankruptcies and home foreclosures are associated with an uninsured personal disability. Mental illness, divorce and a host of other problems are associated with the strain caused by long term loss of income.
Here are a few surprising statistics (compiled by UnitedHealthcare) about your risk of disability:
(For more detail on these statistics and a list of sources, download the 20 page disability income insurance brochure from UnitedHealthOne).
Even after implementation of the Affordable Care Act, Banks report that a majority of home foreclosures are traceable to a catastrophic medical event among people who originally had health insurance! It was the loss of income and not the occurrence of medical expense that ultimately caused their financial world to collapse. The probability that a disability that would trigger financial collapse during an average person's working career is about 1 in 5. Various reports break this down into smaller segments for analysis but the overall message for financial planning purposes remains the same: the risk of disability is one of the largest threats we face in achieving our financial goals.
For starter coverage we suggest adding your fixed major bills together (mortgage, child support, car payment, etc.) These essential fixed bills that would quickly become serious financial problems without a paycheck should be the target of your disability coverage.
Individuals frequently want to insure the amount of their medical insurance premium contribution. Insurers rarely offer this benefit as part of a standard health plan. Medical insurance only works if it is in force while you need care most urgently. If the medical insurance lapses while you out of work and unable to pay the premium, then the entire foundation of your health care security is undermined.
The price of coverage is based on age, sex, occupation, and location. Applicants must typically be under age 64. When controlling cost of insurance is a top priority we suggest using a 2 year benefit period with a 90 day waiting period between the disability and the start of benefits.
For example, a female professional in Philadelphia, 40 years old, a business owner with a shared mortgage (she pays $1,000) and a $330 car payment and $170 total credit card payments could purchase coverage of $1,600 per month. With a 90 day waiting period before benefits begin and a 2 year benefit payment period, the monthly cost of insurance is only $26.
Since disability income insurance is not available to everyone and is priced based on individual factors including occupation and the amount of the bills you wish to cover, it is necessary to hire an independent navigator or use a traditional sales agent to assist with the transaction. Unlike major medical insurance, pricing and enrollment for income replacement coverage is not available directly online. See www.OnlineNavigator.org for the cost and sign-up procedure for this personal service.
Disability insurance may be purchased individually or through an employer-sponsored flexible benefit plan. There are actually some tax advantages to either approach that can be explained by your enrollment adviser.
The cost of disability income insurance is typically 3% to 6% of the net earned income being protected. For example, a person with a $48,000 salary would have a take-home pay subject to the risk of loss in the amount of $3,200 or a take-home pay of $3,050 protected from the risk of loss due to accident or illness. The more conservative choice is overwhelmingly popular among those who have taken the time to learn about the risks.
Disability insurance is not available for directly online enrollment due to the personalization that must be made for each policy. Call us for a affordable professional help that includes a consideration of the disability insurance and other income protection options that may be available.
This web site is independently owned and managed by Tony Novak operating under the trademarks "Freedom Benefits", "OnlineAdviser" and "OnlineNavigator". Opinions expressed are the sole responsibility of the author and do not represent the opinion of any other person, company or entity mentioned. Tony Novak is not an agent, broker, producer or navigator for any federal or state health insurance exchange but may provide uncompensated advice, reviews and referrals to these official resources. Novak is compensated as an accountant, adviser, affiliate consultant, marketer, reviewer, endorser, producer, lead generator or referrer to some of the other commercial companies listed on this site. Information is from sources believed to be reliable but cannot be guaranteed.