Posts Tagged ‘disability’

What if you couldn’t work and pay bills?

Wednesday, September 21st, 2011

 

 

According to statistics provided by the Social Security Administration, 3 in 10 workers entering the workforce today will become disabled before they retire. If that stat isn’t staggering enough, consider the fact that 71% of Americans would find it very difficult or somewhat difficult to meet their current obligations if their paycheck was delayed by just one week. This is a potential recipe for disaster.

 

A full 64% of wage earners believe that they have a 2% or less chance of becoming disabled when the actual percentage is more like 30%. Another misconception is that Social Security will pay disability benefits. While this is possible, it is only true to a small extent; 65% of new disability claims with Social Security were denied in 2009. For the fortunate 35% who were able to receive benefits, the average monthly payment was $1065.

 

Consider further the fact that 90% of disabling events happen outside the workplace, where Workers’ Comp does not apply, and we are looking at major gaps in one’s financial plans. Bottom line? There is a gross underestimation of the chances of becoming disabled over one’s working lifetime.

 

Biggest challenge? Being able to initiate and continue funding a financial plan. In the event of a disability, you will potentially lose anywhere from a month to a lifetime of future income that will make funding any other hopes and dreams for your future difficult if not impossible.

 

Overcoming Obstacles & Putting the Pieces Together

 

The common argument against additional planning is that there is no money left after allocating standard premium dollars for car, house, health and life insurance. The good news is that often, by simply changing the terms of your current contracts, you can obtain protective coverage with little or no additional out of pocket expense. While statistics show this is too important to ignore, 67% of workers in the private sector still have no provisions for long term disability.

 

More than worthy of further investigation, there are numerous variables that will influence the amount premium paid for disability contracts. Firstly, your current health is a big factor to qualify for this contract. Influences include height/weight ratio, chronic conditions including not only medical issues but injury history as well. The usual readings for blood pressure, cholesterol and the like will also influence the situation.

 

Next is occupation. Since the likelihood of becoming disabled in a physical pursuit such as a mechanic is much more likely than it would be for an accountant, the rates will be reflected accordingly.

 

The monthly benefit amount received will be very important in determining the premium. Insurance companies will typically limit you to about 65% of your current income which approximately reflects your current take home pay. The reason for this is that the insurance company does not want you to be better off financially on disability than working nor support a financial disincentive to get back to work.

 

One key point to keep in mind when considering how much coverage you desire: personally paid for disability insurance benefits are not subject to Federal Income Taxes. That provides savings at a time when you will need it the most.

 

The benefit period you choose is also of paramount importance. You can select a 1 year policy all the way up to a lifetime policy which will typically pay your benefit until the time that you typically would be retiring from work.

 

Finally, the elimination period for disability insurance is like a deductible. This reflects the time after you are unable to work before you can begin to collect benefits. The longer you wait before you begin to collect benefits, the lower the premium.

 

Putting all these pieces together in a strategic manner should be your main objective. It is highly possible to customize a plan that will not only provide security to you and your family but also work within the parameters of your budget.

 

Kurt Rusch  CLU,ChFC

Debt & Income Insurance

Wednesday, February 23rd, 2011

In the world of insurance, there are two kinds: debt insurance and income insurance. Most consumers don’t think of it in that way, but it is important to understand what these classifications really mean and what they can provide to you.

Debt Insurance

Medical Insurance – pays for your medical bills so your family will not incur the debt of a medical procedure.

Automobile Insurance – pays for expenses incurred as a result of owning a car. The expenses covered will not only include the physical damage to your car but the liability that may incur to others as a result of you operating your car. This coverage is mandated by the states as well as physical damage coverage if the car is financed.

Homeowners Insurance – pays for physical damage to the home as well as liability that may arise while living in the home subject to policy limitations. And, as we all know, homeowners is also mandated when homes are mortgaged.

Long Term Care Insurance – pays for the cost of daily care when a person is no longer able to take care of themselves.

The common thread among these contracts is that all of them ultimately will pay someone else: mechanics, builder, caregivers, doctors and so on. Simply put, debt insurance helps us navigate emergencies and avoid life altering debt as much as possible. What debt insurance does not provide is protection of our income lifelines.

Income Insurance

The way to insure one’s income is by securing the proper amount of Disability Insurance. Debt insurance provides coverage of expenses incurred; disability insurance provides the money needed for your family to live on if you become sick or injured and unable to perform your job.

Many people mistakenly assume disability insurance is unnecessary because the Social Security system will provide for us in the event of a disability. While there is some truth to this, there are gaping holes which exist in actual benefit redemption.

First, the vast majority of claims that are filed with the Social Security Administration for disability are denied. 65% of initial claim applications were denied in 2009.* Secondly, the definition that social security uses for disability is vastly different than the verbiage commonly used by private providers. Over 51 million Americans classify themselves as fully or partially disabled. Only 8 million disabled wage earners were receiving Social Security Disability (SSDI) benefits as of June 2010.* Finally, the amount that you qualify for can vary greatly from the amount you may qualify for on a private contract. The average SSDI monthly benefit payment in 2010 was $1,065 per month. 52% of claimants received less than $1,000 per month.*

* Statistics as reported by the Council for Disability Awareness

In the world of consumer choices, there are two kinds: what you want and what you need. Evaluate your needs at a deeper level than face value; what do you really need to do to protect and provide for yourself and your family?

Kurt Rusch  CLU, ChFC