It’s difficult enough to cope with the physical effects of a debilitating injury or illness, but the financial impact can only add to the sense of desperation. For example, the prolonged loss of income resulting from a disability leads to 46 percent of home foreclosures, according to SmartMoney.com.
Even worse, the risk of meeting this fate is significant, because one in seven workers will eventually find themselves disabled for more than five years.
An extended period of unemployment caused by disability has the potential to wipe out your retirement savings or leave a mountain of debt. Could your family cope well if you lost your income in the event of an accident or chronic illness? If not, you might want to consider the financial protection offered by disability income insurance.
Disability income insurance replaces a percentage of your salary if you should experience a long-term disability that makes it impossible for you to continue working. Benefits may last for a set number of years or even until retirement age.
An individual plan purchased for yourself may cover up to 70 or 80 percent of your current income, whereas an employer-sponsored plan typically covers less. Group plans may also have monthly maximums that could result in a greatly reduced income for highly compensated employees, especially those who earn $100,000 or more. Even if you benefit from group disability insurance, a supplemental plan could help you bridge the income gap and maintain your family’s current standard of living.
It’s certainly not pleasant for a healthy, active, and gainfully employed person to consider the possibility of a life-changing disability — and plan accordingly. But if unfortunate events should unfold, disability income insurance could help protect your family from the financial hardship that often follows.