Do I Need Disability Insurance?
More than 51 million working adults in the United States do not have disability insurance. When it comes to insuring against various potential hazards, disability is usually not something that comes to the top of people’s minds.
Those who own automobiles are required by law to have car insurance, and those who own a house that is secured by a loan are required to have homeowner’s insurance. And most individuals usually see the need for health insurance and life insurance, even if they are unable to obtain these types of coverages for whatever reason.
Disability insurance is something many working Americans overlook. Some are not aware of the fact that an average 20-year-old worker has a one in four chance of becoming disabled before they retire. Others understand the need for coverage, but they are confused about how to go about obtaining it. Still others believe that there will be alternative ways to receive financial assistance if they ever end up with the disability.
Do I Need Disability Coverage?
This is the first question often asked by working adults when the subject of disability insurance comes up. When you are young and healthy, the last thing you want to think about is the possibility of developing a debilitating condition that keeps you from being able to work. But the fact is, becoming disabled is far more common than most people want to believe.
You have insurance in case of a car accident or a fire to your home, and these are events that are less likely to occur that a disability. Doesn’t it make sense to have insurance for the one asset you need to earn a living – your ability to work?
The alternative is to risk financial insolvency and essentially becoming dependent on the government to survive. This may be a risk you are willing to take (although it shouldn’t be) if you are single and have no one else to provide for aside from yourself, but if you have a spouse and family, do you really want to put them at risk for this type of hardship?
What about Workers’ Compensation and Social Security Disability?
A lot of people mistakenly believe that they will be covered by other programs if they ever end up with a disability. The first one they usually think of is workers’ compensation through their employer.
It is true that most employers are required to carry workers’ comp insurance, and this provides no-fault coverage for work-related injuries or illnesses. The key term here is work-related. Your disability must be caused by your work activities, or workers’ comp will not cover it.
The problem is that according to the Council for Disability Awareness, most disabilities do not result from accidents. The majority of them actually come from health conditions that develop over time, such as cancer, heart disease, and back problems. If you are able to get approved for workers’ comp for a future disability you may develop, great. But understand that there are a large percentage of cases in which this type of coverage is not available.
Social Security Disability Insurance (SSDI) is available to working adults who work at least 40 quarters (10 years) or meet other specific qualifications. But SSDI has two fundamental flaws.
One is that there are strict caps on benefits, and the average recipient (as of 2019) receives only about $1200 per month. The second flaw that is perhaps an even greater concern is that only about one-third of SSDI claimants are approved for benefits.
In many cases, you will need to go through multiple levels of appeal, wait several months or even a couple years or more, and hire an attorney (who will take a portion of your benefits as their fee) before you finally end up getting any benefits from the program.
The bottom line is that you cannot count on other programs to help get you through if you should lose your income because of a disability. Workers’ comp and SSDI are full of holes, and you need a reliable alternative in case these two programs are not available to you.
Where can I Purchase Disability Insurance?
Obtaining disability insurance does not have to be a difficult task. There are private plans available that you can purchase from an insurance broker or by shopping around on the internet. You will usually need to undergo a medical exam to get approved for a plan, and the entire process from the initial application to approval typically takes about four to six weeks.
Another way to get disability insurance is if there is a group plan offered by your employer. There are many advantages to employer-sponsored group disability insurance. For one thing, it is very easy to apply for. It is usually just a matter of checking a box to select a plan during your employer’s open enrollment period. Premiums are usually lower through your employer as well, and you are guaranteed approval without the need for a medical exam.