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Life Happens, but Purchasing Disability Insurance is Intentional

Happy, without Purchasing Disability Insurance

Daria and Daniel Diligent had it all figured out. Both were hard-working professionals — Daria a dentist and Daniel a pilot. Happily married and living in a beautiful home, they were raising twin girls with the peace of mind that they had planned for everything and anything.

The Diligents researched the best health insurance, made sure to have their wills in order and purchased term and whole life insurance, as both a protective measure and an investment. While extras like purchasing disability insurance weren’t at the top of the list, they were happy with their protection in the event of “life” happening. The Diligents lived a conservative lifestyle and were savvy about contributing into their brokerage and retirement accounts, opening college accounts for the children and living within their means.

You may also be interested in, “What People of All Ages Need to Know About Long-Term Care Insurance.

Then, one day, Daria noticed her right hand was starting to shake. Frightened, Daria kept the tremor secret from her employer and her family. She cut out caffeine, hoping it would help, but it did not. Daria was both embarrassed and nervous that her patients would see the tremors and question her. Who wants a dentist with shaky hands?

When the tremors worsened, Daria had to face the fact that she may have a serious health issue, one that might impact her ability to earn her living. She began to research purchasing disability insurance. Sadly, it was too little, too late.

If Purchasing Disability Insurance isn’t a Priority, Here’s Why it Should be

While Daria had remembered her life insurance salesman trying to convince her that purchasing disability insurance was important, the conversation never evolved beyond that. How did such a very important decision slip off her (and Dan’s) radar? And, what would the impact be? Would Daria’s job provide disability benefits, and, if so, for how long? Would the state provide an income replacement benefit? What if she was able to work, but not in her chosen profession? Why hadn’t any of this occurred to her before?

If she were totally honest with herself, Daria thought the insurance salesman had been a little too salesy and that he had earned a pretty penny on their term and whole life policies. At the time, she had not been prepared to make another monthly payment just for purchasing disability insurance.

“Come on now,” she thought at the time. “I am relatively young and healthy. How much money am I going to ‘waste’ on another insurance policy?”

Unfortunately, Daria is not alone. People are often prepared with medical insurance for health issues and life insurance for death coverage, but somehow the prospect of purchasing disability insurance to replace income lost due to illness or accident is frequently overlooked.

Don’t let that be you.

Which Disability Insurance is Best for You?

Individual disability insurance is important for everyone, especially for those who are single and have no other source of income. Independent contractors or otherwise self-employed individuals do not have the advantage of employer-provided benefits (such as earned sick leave). Those who do not have sufficient emergency funds to carry them through in the event that their income flow abruptly ceases face a devastating realization.

While some employers may provide disability benefits, be sure to find out (in advance) exactly what those benefits are. Generally, employer-based disability will provide a small payment — it will not fully replace your income — and it will likely be limited in duration. (Note: workers’ compensation benefits will only be available if you suffer a job-related disability.)

Those who do not have sufficient emergency funds to carry them through in the event that their income flow abruptly ceases face a devastating realization.  

Relying on Social Security disability benefits is likewise inadvisable. While Social Security does provide benefits to “qualified” persons, the guidelines are very strict and there is often an extended waiting period for eligibility, usually more than six months.

When purchasing disability insurance, be aware that your individual disability insurance will not have the same employment/government limitations vis-a-vis benefits and restrictions. Purchase the policy that meets your specific economic needs.

You may also be interested in, “Your Living Will: Are You Truly Prepared?

In Daria’s case, as a dentist, an “own-occupation” policy that defines “disability” as the inability to work specifically in her trained field, would have provided Daria with income replacement if it is determined that she can no longer practice dentistry. Had Daria purchased an “any-occupation” policy, she would likely not collect on the policy, as that type of disability policy pays only if there is no type of work that Daria could do. (Note: Social Security uses the any-occupation policy definition to qualify people for benefits.)

Is Time on Your Side (in Your Policy)?

Be sure to investigate which policy options are available, as there are often mixed options with respective premiums. In researching which policy is best for you, be mindful of the number of days (the “waiting period”) from disability onset to benefit entitlement. Longer waiting periods are commensurate with lower premiums, so if you can cover 60 or 90 days with your emergency fund and/or employer provided sick days, that option may be economically better for you. Only you know what your finances and financial habits look like, so seek out multiple estimates and take the time to research your options and make a financially-fit decision.

This is another one of those decisions you would rather avoid, I understand, but please don’t be fooled into believing this couldn’t happen to you. I would much rather “waste” some time and effort on analyzing and purchasing disability insurance decision today, than face Daria’s fears tomorrow. Wouldn’t you?

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About Michelle Gershfeld

I’m a debt settlement and bankruptcy attorney who negotiates resolutions between clients and their creditors. I am also a real estate attorney involved in both sides of purchasing and selling distressed real property. I am passionate about teaching people about money and helping individuals of all ages achieve financial independence and success in a "no…

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