Broker Check

Despite what you might think...it CAN happen to you

September 05, 2019
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Disability insurance is one of those things we just don’t want to talk about, isn’t it? It’s like trying to determine who should take your kids should something happen to you or if you have enough life insurance to cover the debt you actually have.

Uncomfortable, right?

But it’s a discussion worth having. According to the 2017 Disability Statistics & Demographics Annual Report (Sept. 25, 2019), “the overall rate of people with disabilities in the US population in 2016 was 12.8%” – and it’s on the rise.

The unrealistic thought that “it can’t happen to me” also contributes to the fact that many Americans don’t have enough saved should something keep them from working, even for a few months. The combination of inadequate disability coverage and insufficient funds in most bank accounts should be something that is examined in every household in America.

LifeHappens.org (Sept. 25, 2019) says it best: “You don’t hesitate to insure your home, car and other valuable possessions, so why wouldn’t you also protect what pays for all those things—your paycheck.”

And the thing is…it can happen to you. Statistics from DisabilityCanHappen.org (Sept. 25, 2019) show that one-fourth of today’s 20-year-olds will become disabled before retirement. But lack of education about disability services is a big factor as to why so many people aren’t adequately covered.

What does disability insurance cover?

“Disability plans cover many different medical problems that can keep people out of work. Some of the most common short-term disabilities include maternity leaves, broken bones, diabetes and back injuries. Cancer, muscular tissue disorders and the losses of sight, hearing and limbs are some of the long-term disabilities that are covered.” PocketSense.com (Sept. 25, 2019)

Aren’t I covered through Social Security?

Yes, there is Social Security Disability and you are covered if you meet the requirements. However, there is usually at least a 5-month gap between when you file and when you start receiving benefits.

If my employer provides disability insurance, do I need more?

“Many group plans only cover 60% (or less) of your income. Plus, since your employer is paying for it, it’s taxable, meaning your actual check could be closer to 40% of your income. Plans might also have maximum benefit amounts, which means that, especially for high-income earners, the income received for your family isn’t nearly what you’re used to each month.” PolicyGenius.com (Sept. 25, 2019)

Still not sure?

If you’re still wondering if you need to investigate disability coverage, here are a few statistics from DisabilityCanHappen.org:

A lack of adequate disability coverage.

  • At least 51 million working adults in the United States are without disability insurance other than the basic coverage available through Social Security.
  • Only 48 percent of American adults indicate they have enough savings to cover three months of living expenses in the event they’re not earning any income.
  • Almost half of American adults indicate they can’t pay an unexpected $400 bill without having to take out a loan or sell something to do so.

The consequences are alarming.

  • A 2014 study of consumer bankruptcy filings identified the following as primary reasons: medical bills (26%), lost job (20%), illness or injury on part of self or family member (15%).
  • A 2013 study of bankruptcy filings in Washington state found that cancer patients were 2.65 times more likely to go bankrupt than people without cancer, with younger (under age 50) cancer patients having the highest rates of bankruptcy.

Workers’ Compensation and Social Security do not cover most of these challenges.

  • Workers’ Compensation only covers time away from work if the disabling illness or injury was directly work-related. In 2016, only one percent of American workers missed work because of an occupational illness or injury.
  • From 2006 to 2015, only 34 percent of Social Security Disability Insurance (SSDI) claimants had their applications approved: 23% at the initial application stage and the remainder after a reconsideration or appeals process.
  • It generally takes three to five months from time of application for SSDI benefits to get an initial decision. The backlog of appeals cases was more than one million in 2017, with associated processing time averaging more than 18 months.
  • The average SSDI benefit as of January 2018 was $1,197 a month. That equates to $14,364 annually — barely above the poverty guideline of $12,140 for a one-person household, and below the guideline of $16,640 for a two-person household.

(Click here for the full article and sources.) (Sept. 25, 2019)

Melissa Thompson is an Investment Advisor Representative holding a ChFC® designation in the Castle Rock, CO and Denver, CO areas who focuses on educating individuals and small businesses about the importance of protecting and growing their financial assets. “My preliminary meeting process is a chance for us to talk about where you are and where you’d like to go. You’ll have the opportunity to make sure that my services fit your unique needs before you commit to moving forward. I look forward to creating life-long relationships with my clients and taking the fear out of financial planning.”

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