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Did you know that you probably have a greater chance of being injured or disabled than dying during your working life? Why then do most people carry large amounts of life insurance but don’t have any disability insurance? Why do we spend good money to insure our cars, our homes and other possessions against damage but ignore the fact that humans can become damaged and disabled, too?
Reasons For Getting Disability Insurance
Your Greatest Asset
Your ability to work and earn money is arguably your greatest personal asset. You owe it to yourself and your dependents to be fully insured against the event you can’t work for a period of time.
I guess everyone knows they will inevitably die and everyone likes to back a sure thing. People gamble that they won’t become ill or injured, by not carrying disability insurance.
Don’t Live in Denial
However, the statistics are sobering. They show that nearly 25% of workers will face a period of disability that prevents them working for longer than 90 days at least once in their working lives. Add to this the fact that the risk of disability increases as workers age. In addition, 20% of incapacitated people will be off work for 5 years or more.
You’ll possibly have read that it is vital for your financial security to have an emergency fund that you continually put money into. Many people think this will keep them going if they are off work through injury or illness. They could be right; as long as they don’t stay incapacitated for long.
Life goes on, expenses stay the same and the bills keep coming in, whether you’re working or not. There’s likely to be medical bills on top of your usual expenses. There’s also the mental and emotional stress of your family, who are trying to keep things going while you’re ill.
Consider Your Family
Not only will disability insurance help to offset the expenses, it will also reduce the stress levels of family members. The insurance is there to prevent you losing everything you’ve been working for and to ensure your family’s ongoing financial security.
People tend to believe that it won’t happen to them; that’s why they don’t consider disability insurance. Unfortunately, accidents can happen at any time, at any age and in a multitude of circumstances. Whether it is a car accident, a natural disaster, a sports injury, a workplace accident, a simple fall, chronic or serious illness, the potential is there in everyday life for something that will create an inability to work.
Of course, not all accidents cause a disability. In fact, a Group Disability and Risk Management survey published in 2002 showed that nearly 90% of all disabilities are caused by illness and disease, rather than accidents. The most common causes cited included cancer as well as diseases of the circulatory and musculoskeletal systems.
Can’t Afford Not To Have It
When workers were surveyed to find out how many had disability insurance, the primary reason given for not having any cover was the potential cost. Many workers thought disability insurance would be expensive and they couldn’t afford it. We have shown that you really can’t afford not to have it.
The cost of disability insurance is dependent on a number of factors and these vary between different people. These include age, gender, current wage and the type of work you do. The cost of insurance will be higher if you work in high-risk environments. You will need to decide how much of your normal income you want to receive while you are unable to work; the higher the amount, the higher the premium.
There are several additional features you could include in your disability insurance policy, maybe a cost of living adjustment or whether you want to be covered for both illness and injury. Remember though, the more features you have, the higher the premium you’ll have to pay. As a general rule, you would expect to have to pay one to three percent of your annual salary.
The second most common reason workers didn’t have private disability insurance was the belief that they would be covered by their employer’s insurance. This may be the case, as long as you were injured at work. As we have seen, most cases of disability that prevent people from earning a living are not caused by workplace accidents.
There are other types of insurance that may offer some disability coverage. Your auto insurance policy may include some disability coverage if you are in an accident, for example. It is really important that you understand how and when you are insured, so that you are not left in a situation where you can’t pay your bills and lose all your savings trying to meet day to day expenses while you are off work.
While disability insurance is an important consideration when creating your financial plan, it is vital that you take the time to consider your options and get the best rate of coverage that you can afford. Seek some professional advice if you are uncertain.