You Need Disability Insurance

All this talk about financial planning got me thinking about an important lesson that my brother-in-law, Brock, taught me when I first got married. Brock sat me down and made sure that I understood the value of disability insurance. The truth is that prior to that conversation, I'd never given a whole lot of thought to the likelihood of getting disabled or about putting a strategy in place to protect my income in the event that I did get disabled. Consider the following:

• Most people buy life insurance - but you have DOUBLE the chance of getting disabled before retirement as you do of dying


• 30% of twenty year olds will be disabled before retiring
• 1 in 7 Americans will be disabled for 5 years or longer before retiring
• Disability causes 50% of all mortgage foreclosures - compared to only 2% being caused by death of the primary breadwinner

Bottom line - you need disability insurance and you probably need to buy it yourself rather than rely on whatever is provided by your employer. If your employer provides disability coverage (not all do), it's likely that it only covers 60% of your base salary and it is subject to income tax. Say hello to your new life living on 45% of what you earn today. That, for me, is not getting the job done. Plus, if you rely on employer provided insurance, welcome to a career with one company. If you can't take that insurance with you and you get disabled or have the slightest illness, good luck trying to get new coverage when you change jobs. Individual disability insurance (paid for by you) is not subject to income tax since you pay for it with after-tax money and you can purchase coverage for more than 60% of your income (I think it's capped at 75% but I'm not positive).

A quick note on government provided disability. It stinks. Why? Because a majority of claims are initially denied - putting you in financial jeopardy while the appeal works its way through the system (isn't that lovely). There are also qualifications about what it means to be disabled. In other words, if you can't get a job screwing toothpaste caps on with your teeth, get to work you able-bodied person and stop trying to get disability. You want the kind of insurance that kicks in if you can't do the job you're currently doing - not the kind that kicks in if you can't work at all.

More reading can be found in the links below. Add this to the list of topics you and your family need to consider ASAP and talk to your financial advisor about it soon. You never know when accidents will happen or your health might give out!!

Disability insurance: The coverage that most folks never think about

Protect Your Family When Disability Strikes