By Jeff Jones, CFP®,MS
NAPFA Registered Financial Advisor
There are some combinations of words that you never expect use in the same sentence. Yet, I found myself at the breakfast table telling my two-year-old daughter, “Get that bacon out of your nose.” Really, what would make a child even think about trying this!?! I don’t have to tell you that life is full of surprises, and those surprises bring with them an array of emotions and outcomes. Some surprises can bring financial hardship and devastation to your family. I’m talking about becoming disabled.
What are my chances of becoming disabled?
You may be surprised to know that your odds of becoming disabled are 1 in 4[i]. We protect our home with insurance when the chance of a catastrophic fire is 1 in 100[ii]. We protect our automobiles when the chance of a wreck is 1 in 20. Yes, many times we fail to protect one of, if not our greatest, assets: our ability to produce income. Statistics show 1 in 4 30-year-olds today will become disabled before age 65[iii]. You may also be surprised to know that less than 11% of disability claims are due to injury; most are a result of illness.
What are the consequences of becoming disabled?
Most families are not financially-positioned to deal with the loss of income that stems from disabilities especially when the average long-term disability claim is almost three years. If the disabled individual was the sole income earner, the results are dire. To complicate matters even more, along with loss of wages come medical bills and the loss of means to fund retirement, all of which can lead to bankruptcy, home foreclosures, and a decrease in the quality of care accessible to you.
But I have long-term disability through my employer!
Group long-term disability policies have a waiting period, frequently 90 to 180 days, before benefits become available. When eligible for benefits, you will receive a percentage of your income (e.g. 60% of your monthly take-home pay). Did your employer pay for your group coverage? If so, your benefit is fully taxable!
Do you know how much disability income you can expect? If not, let’s make a plan.
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