The foundation of success in life is good health: that is the substratum fortune; it is also the basis of happiness. A person cannot accumulate a fortune very well when he is sick. ~ PT Barnum
Admit it; when you were young, you thought you would live forever, and nothing would ever slow you down. Then you went to college and life got a little tougher. Then you moved into the job force, and you realized that your youthful hubris was due to a small world view. Don’t believe us? Ask any of the one in four of today’s 20 year-olds who will become disabled before they retire. Unsurprisingly, sudden accidents are not the leading causes of long term disability, while back injuries, cancer, and heart disease are the most significant causes of long term disability.
When most people are looking for a life insurance policy to purchase they forget about considering long term disability insurance. The reality is that attaining a long term disability will most likely have a more considerable financial impact than sudden accidental death. If you die suddenly, there will not be an ongoing living cost for care and your heirs will benefit from your life insurance policy.
With the cost of living so high and growing each day, you can prevent financial risk for your family or spouse should a long term disability occur. Taking out a long term disability insurance policy can replace around two-thirds of wages should you be unable to work due to an ongoing disability. Thus disability insurance has excellent potential to mitigate financial risk.
In reality, long term disability insurance (LTD) could also be appropriately called “income replacement insurance” as well.
Long term disability differs from short term disability in that it starts after a few months when it becomes evident that a recently acquired disability prohibits you from being able to work. The interim period between short and long term is how long you have to be disabled before the benefits start. Long-term disability policies can last for 2, 5, or 10 years, or until retirement. Before taking out a long term disability policy, you should review your short term disability coverage with your agent to make sure there is not a gap between the end of your short term coverage and the start of your long term coverage. Also, it is worth noting that some short term disability insurance plans require the insured to be employed to continue to receive benefits.
When LTD is calculated it is with the belief, you will rely on your cash savings or have a short term policy cover you in the first few weeks following the disability. The premiums you pay into are roughly one to three percent of your annual income depending on a medical exam required for people who don’t get coverage through an employer according to an informative 2014 New York Times article. One plus of purchasing LTD on your own is that any payout is tax-free taxable as opposed to if an employer pays for your premiums.
It is also possible to buy a supplemental long term disability insurance policy that will make up the difference. For example, if your employer’s plan pays 60% of your wages if you become disabled, you can purchase a separate plan to pay the remaining 40% of your pre-disability income. Insurers can’t offer more than your annual income, as it may provide deterrence for some in regards to getting better. Unfortunately, thousands of injured and sick workers each year are illegally denied disability benefits because insurance companies have the incentive to deny benefits. If this happens, it’s essential to mention you have the right to appeal the denial.
While you have the option to purchase coverage for yourself or through your place of employment, it is an excellent idea to acquire it any case. If you are unsure if you have coverage through your employer, your human resources department will have this information. Ask to review the “Plan Document,” and this will provide the exact terms of your coverage.
Do you want to purchase long term disability insurance for some peace of mind? Get expert advice from Shapiro Financial Planning Group; we can provide you guidance on choosing a long term disability insurance policy.
