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Disability: The Overlooked Insurance

MoneyWise

Christian talk radio with Rob West

August 31, 2022

Did you know that most employers offer disability insurance plans, but most employees don’t sign up for them? Maybe it’s the It won’t happen to me syndrome or thinking that Social Security will fill the income gap if someone becomes disabled. We’ll discuss that today on MoneyWise. The good news is that nearly 80% of employers offer short-term disability benefits, and about 65% even offer long-term benefits for disabled workers. The bad news is that only about 35% of workers take advantage of either form of disability coverage. That’s a recipe for financial disaster because the Social Security Administration says 25% of working adults will experience at least a temporary, disabling ailment before retirement. And the National Institutes of Health says that more than 20 million workers report a work disability each year. The main physical causes are back and neck problems, while depression and anxiety top the list of mental ailments. Many uninsured workers may not realize the financial impact that a disability may cause. About half of them need a full two years to recover financially from those lost paychecks, according to a study by the insurance carrier Cigna. One reason workers may not sign up for employer disability plans is that they don’t think they need it. They may think that anyone who pays FICA taxes into the Social Security system is automatically covered for disability. And yes, that’s true. But, the basic coverage provided by the Social Security Disability Insurance program is just that, basic. The average monthly SSDI benefit is only $1, 200. These days, that may not even cover the rent or mortgage payment, let alone put food on the table for a family temporarily without income if the breadwinner can’t work. And despite what many might think, it’s not that easy to qualify for SSDI. A disability must put the worker out of commission for at least a year. Plus, it can take a long time to get through the bureaucratic red tape at the Social Security Administration. So if your employer offers disability insurance, you should take advantage of it. If your employer doesn’t offer a disability plan, you can get an individual policy from most insurance providers. But what exactly are you buying? Disability insurance comes in two basic forms: short-term and long-term. Short-term plans will cover up to 70% of your salary. Long-term plans will cover up to about 60%. So, even the best disability policies won’t cover all of your lost income if you suffer a disabling ailment. And that’s why we always urge you to have 3 to 6 months’ living expenses in your emergency fund. Otherwise, a disability will mean going into debt to meet your monthly obligations. As you shop around for disability insurance, you’ll quickly find that some plans are more expensive than others. Several factors can affect the level of premiums you’ll have to pay. These include not only the amount of benefits the plan would pay but also something called the elimination period. That’s the length of time between when you sign up for a policy and when the coverage begins. This, of course, is to prevent an uninsured person from experiencing a disability and then applying for insurance. Unlike healthcare, disability insurance does not cover pre-existing conditions. Then there’s also the benefit period, and as the name suggests, it’s the length of time that the policy will provide benefits for your disability. Finally, exactly which conditions constitute a disability under the plan will affect its price. Something else you should know about employer and individual disability insurance: The conditions that would qualify you for benefits under those plans are far less stringent than for Social Security disability. Instead of having to demonstrate that you’re completely disabled, you may only have to show that you can’t do the same type of work that you’re doing, and the qualifying length of your disability will likely be less than the 12 months required for SSDI. Having adequate disability insurance is a must if your family depends on your income. 1 Timothy 5: 8 tells us, If anyone does not provide for his relatives, and especially for members of his household, he has denied the faith and is worse than an unbeliever. We hope that clears up any misunderstanding you may have had about disability insurance. On today’s program, Rob also answers listener questions: ● What is the wisest thing to do with a home after retirement is set? ● What factors should you consider when considering the best job to take from a financial perspective? ● How do you determine the best thing to do with a whole life insurance policy? RESOURCES MENTIONED: ● CHministries. org

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