As obvious as it may seem, the term ‘insurance’, is majorly identified as insuring materialistic possessions like cars, houses, and of course one’s life by opting for life insurance policies.
Yes, it's indeed a common presumption that the probability of losing life is much more than the probability of losing the ability to earn due to accidents or mishaps.
Therefore, people seldom picture worst-case scenarios wherein they lose their incomes owing to accidental disabilities and hence, overlook insuring their paychecks.
But, if you come to think of it, your paycheck is the most deserving consideration that needs to be taken care of, before anything else. After all, you need the darn money to buy anything for that matter! Thus, your paycheck needs to stay intact for you to feel protected even after misfortune has struck.
Though one may reason that people remain ignorant because short-term disability insurances are often provided by all the employers, in the form of sick leaves. But the question is- what happens when this ‘disability to perform’ plans to stay for a while, let's say, more than a few months?
This is where disability insurance jumps in as a safety net, to provide you with a paycheck when you need it the most.
While getting started with being familiar with the term, it is important to know what exactly is disability insurance and how it can benefit you as an employee.
So let us know more about it.
What is Disability Insurance
As the name suggests, disability insurance is a kind of insurance that provides you with income in a situation wherein the policyholder is unable to work due to a disability.
This insurance can be obtained from both public and private organizations.
Americans can procure it from the government through the Social Security System.
How does it work
Disability insurance can be acquired in two forms- Group or Individual. The benefits provided in each scheme largely depends on the kind of occupation and the stature of income drawn by the policyholder. For eg. A doctor or a lawyer would fetch more profit than those involved in comparatively low-paying jobs.
However, it is important to note that qualifying for the benefits of Social Security Disability Insurance (SSDI) is another journey altogether as it involves very strict restrictions and requirements.
How does disability insurance help you?
This takes us to the crucial part where we find out how disability insurance can help in protecting our most important asset, which is our paychecks.
Let's understand this with examples
When you are married and have a family, your dependency on your paycheck is directly proportional to your family’s dependency on your contribution to the household. This particularly asserts that in such cases, it is vital to have your disability insurance covered. This is specifically helpful in cases where there are children who need to be taken care of at least till the time they can fend for themselves.
Disability insurance will ensure that in any unfortunate case, any such mishap occurs, you still have a setup to put food on the table.
2. A short-term policy is no big deal.
A short-term policy isn't a deal to be worried about. You can always maintain an emergency fund yourself and self-insure for any unforeseen event.
The difference is, when a short-term plan covers only a few weeks to months, a long-term policy, on the flip side, can promise a longer period from a few years to a lifetime. It is however recommended that you look for something that pays at least till 65 years of age.
Visit this website for detailed information on long-term disability insurance plans.
3. Work out your budget and aim for maximum benefits.
When you finally decide upon taking up a long-term policy, it is suggested that you take time and get a financial advisor to curate a customized plan for you that works well with what you can afford. There are numerous factors that you can keep in mind for the highest gains.
For eg., you can fine-tune the monthly benefit amount, the benefit period (the duration of time for you to receive benefits, if disabled), the elimination period (the duration of time you must be disabled before benefits can be availed), etc.
This will assure you better coverage with maximum profits.
4. Plan the coverage amount generously.
Generally, people tend to plan an amount for the coverage that sets close to their present spending trends. While this is a common practice, it is not considered a very smart move in the financial arena. This is because when a disability occurs, the medical expenses, in most cases, skyrocket. Similarly, a disability can cause various other expenses that may not be in your arrangement but call for immediate care. Like, paying for your children’s education, managing your medical supplies and equipment, etc. Thus, you gotta plan accordingly.
5. Quit thinking your employer’s plan is enough.
As stated by the Bureau of Labor Statistics, around one-third of employers offer a disability policy. However, it remains a fact that while employer insurance plans are cheaper, the benefits they provide are mostly taxable, short-term, non-portable, and insufficient too.
As a result, a majority of people don't buy these plans. Hence, it is advised that when you are on the lookout for disability insurance from your employer, make sure you purchase your disability policy too as an extra cover.
To conclude, it can be stated that the probability of being dead is much lower than the probability of being injured in an accident or diseased with hazardous illnesses like cancer, etc.
To add to the illustration, it also doesn't necessarily have to happen at the workplace only. Instead, it can happen anywhere.
And god forbid, if such a thing happens, it is only prudent to take up a policy that aims at safeguarding your most valuable asset- your paychecks.
So stop procrastinating and start acting at once.