Do You Need a Disability Policy?

Increasing Need - Injuries and illnesses that once resulted in death are increasingly treatable and result in longer life spans. However, they often result in periods of inability to engage in meaningful employment. You are far more likely to suffer a long-term disability before age 65 than you are to die before age 65.

Putting the Odds in Perspective

Disability occurs for many reasons. Some relate to hazards of employment and may not concern you. The most common causes of disability, however, are heart disease and back problems, ailments which can hit anyone. Other common causes of disability into automobile accidents, cancer, and head injury.

Disability occurs far more often than other events that are commonly insured. It occurs more often than premature death. It occurs more often than fires in the home. It even occurs more often than serious automobile accidents. Roughly half of the disabilities that keep someone out of work for six months or more still have them disabled after five years. One employee out of seven will suffer a five-year disability before age 65.

Quantifying Your Need for Coverage

Your need for coverage is based on several factors, including:

Your fixed expenses
Your available assets and non-employment income
The income of your spouse
The age of your children
Your existing entitlement to disability benefits
The potential for increased living expenses due to the need for medical care, household help or child-care

The most complex of these factors to grasp is your entitlement to other disability benefits. While you may qualify for Social Security benefits, you should understand that the definitions used by the Social Security Administration are very restrictive. You should also understand whether your group coverage is short-term or long-term and what percentage of your income would be paid in benefits. A comprehensive analysis is necessary to determine the exposure you should cover with a private disability policy.

Maximum Coverage Available

Insurance companies will not write policies for 100% of your income. The maximum varies from company to company, but typically ranges from 50% to 70% of earnings.