Liz Davidson, Contributor
If I were to ask you what your most valuable financial asset is, what would you say? Your home? Your 401(k)? For most people, it would be their ability to earn a living.
What if I asked you what the biggest threat is to that ability to earn a living? You might think of various ways you could kick the bucket, but it’s been estimated that over the course of your career, you’re 3.5 times more likely to become disabled than to pass away prematurely. In fact, one of our own planners recently experienced a disability in his own family.
Unfortunately, workers’ compensation doesn’t cover the 95% of disabilities that are not work-related and only about 40% of people who apply for Social Security disability benefits are able to qualify due to their notoriously strict standards. Hopefully, you have disability insurance through work, but there are several reasons why this still may not be enough. First, make sure you have a long term policy. Short term policies that cover up to a year are nice to have but according to the American Council of Life Insurers, about 1 in 7 workers will be disabled for more than 5 years. Second, your policy may only cover you if your disability makes you unable to perform any suitable job even if that job pays considerably less than what you make now. Group policies generally cover 60% of your income but there’s often a dollar amount cap on benefits of about $5k a month so you could actually receive less than 60%. Any benefits you receive from an employer-paid policy will also be taxable. Finally, if you leave your job, you generally can’t take your policy with you and you may no longer be able to qualify for an individual policy if your health deteriorates.