Your most important asset
What is your most important asset? Is it your house, your investments, your education, or something else?
It’s your health.
Yet our health is often one of the most-neglected things. And even those who do take excellent care of their health can still be afflicted with diseases or hurt in an accident.
What would happen if you became disabled and were no longer able to earn an income? Even if you’re not the only income-earner in your family, chances are that you do use your money for living expenses. And you may need expensive care, which can further eat into your money.
I’m going to sound like a disability insurance ad here, but it’s important to protect your ability to have an income. According to the 2006 Disability Report by Cornell University, “the overall percentage (prevalence rate) of working-age people with a disability ages 21 to 64 in the US was 12.9 percent.” That stat goes up to 30.2% after age 64 — and many people are likely to work past age 64, especially now that the full retirement age for someone born in 1960 or later is 67.
If someone told you that your chances of winning the Powerball were between slightly-better-than 1 in 10 and as high as 3 in 10, would you buy a ticket? I sure would. Those are some good odds.
In the disability game, the odds are even higher for women. After watching my mom get cancer, become 100% disabled, and die at a young age, I did eventually wake up and buy long-term disability insurance. (I’ll write about that process more later.) You would think that having seen what my mom went through, I would have rushed right out and bought it immediately, but disability insurance is one of those things that people procrastinate on.
The immediate somehow seems more important, but it’s not. If you don’t have long-term disability insurance, consider getting it now. The easiest way to get it is through your employer, if they offer it, since there is usually no underwriting process with that. The down side to that is that it if you leave your employer, you’ll lose your coverage. But that’s where I’d start, since it’s the easiest to get. You can also apply for disability insurance through companies like Metlife, John Hancock, and Guardian. (There are probably others too, but those are some companies that come to mind.) Unless you’re already independently wealthy and don’t need to work, obtaining disability insurance is an important step in becoming financially healthy.
May 29th, 2008 at 7:06 pm
I’ve been doing research on long term disability insurance for a while now, but haven’t made any concrete decisions. I look forward to reading your series because I’m having a little trouble with deciding which company to go with.
May 30th, 2008 at 8:41 am
John Hancock does not offer individual disability insurance, they offer long term care insurance in addition to their normal life insurance portfolio. The leaders in the individual disability insurance market are Guardian (Berkshire), MetLife, Unum, Mass Mutual, Standard, Union Central, and Principal.
I’d also point out that there are substantial differences between an employer sponsored group long term disability plan and an individually owned disability insurance policy. A group LTD plan typically has much more restrictive definitions of total disability, which defines how a person gets paid and for how long. A group LTD plan will typically have a “decent” definition of total disability for the first two years of a claim, then change definitions to a much more restrictive “gainful occupation” definition of total disability which may result in the termination of benefits during a claim. An individual disability policy is much more likely to have a significantly better definition of total disability for the entire benefit period. There are a lot more benefits for an individually owned policy beyond the definition of total disability, but people should know that relying on a group LTD policy for income protection is typically not the best avenue, and there is a lot of exposure in relying on group LTD.
June 1st, 2008 at 12:57 pm
I would also add, for families with severely limited incomes, that many states offer disability insurance coverage. California’s is quite good, but then again we do everything fabulously. :)
Anyhoo, it’s something to consider in addition to hunting for third party coverage! (Great post, as usual.)