Adequacy of Disability Insurance - A Problem Ignored
Unless you made a fortune the old-fashioned way (inheritance) and you are now independently wealthy, you have to consider whether you have adequate protection against a long-term disability. A recent study showed that most active workers have not done any planning in regard to this need. People insure almost everything else; houses, lives, car, medical care, dentistry, and then ignore insuring their most valuable asset. That asset is the income-earning potential that you have between now and the day you stop working, including value which gets added to your pension benefit for retirement. What would happen to that income earning potential if you developed a debilitating disease, got trampled by a moose, or run over by a bus? You need to quantify how long your available cash, savings and other household savings would take care of you in the event of an unexpected disease or accident.
A Need that is Real
Statistics show that a 20 year old worker has about a 30% chance of experiencing a disability sometime before retirement. Most of these disabilities will be of a limited duration, others will be long-term, some will be permanent. Many will last long enough to exhaust the entire savings and ability to borrow of an average worker. This risk could possibly be borne by a single person who has no dependents. But if you are married or have dependents, you need to evaluate your current coverage for long-term disability, and determine how much more you might need to be protected.
What are the sources for disability coverage you may already have?
Unless you are nearing retirement and can rely on your pension in case of a disability, you need to give serious thought to obtaining individual disability insurance. The main factors which determine the cost of this insurance and considerations include these: