When you become disabled due to an illness or injury that prevents you from working, the paychecks you regularly depend on to pay your bills abruptly stop coming in. Unless you have an active disability insurance policy, your income will drop to zero. When you run out of paid sick days and vacation time and still can’t go to work, the harsh reality of how to pay your bills without an income quickly sets in.
The chance of becoming disabled may be greater than you think, even if you’re young and healthy at the moment.
To clarify the importance of disability insurance, we’ll provide some definitions of a disability, explain why nearly everyone needs it, and describe how a disability policy protects your income and livelihood.
What Is the Definition of a Disability?
To understand the definition of a disability, it’s important to look for it in the right place. Different organizations define the word disability differently.
Here are some examples of the definition of a disability:
A person who has a physical or mental impairment that substantially limits one or more major life activities. This definition includes people who have a record of an impairment yet aren't currently affected by a disability and those who are regarded as having a disability. (Americans with Disability Act)
The inability to engage in a substantial gainful activity because a physician determined a person is physically or mentally impaired, and the impairment is expected to last for at least a year or could result in death. (Social Security Administration)
As the definition of a disability pertains to a disability insurance policy, the policy wording will describe the definition in exact terms. A disability policy generally includes one of the following definitions:
Own occupation – A disability that prevents you from working at your current occupation.
Any occupation – A disability that prevents you from working at any occupation.
The disability definition in a disability policy is important to understand as it determines when and whether the policy triggers disability payments.
Why Protect Your Income With Disability Insurance?
Disability insurance is valuable for two reasons—anyone can become disabled at any time and the vast majority of people rely on their income to pay their bills.
Younger, healthier people aren’t immune from becoming seriously ill or injured. According to the CDC, one in every four people will become disabled at some time in their lives. Women, American Indians, Alaskan Natives, lower-income adults, and adults residing in the South Census Region are also more likely to have disabilities.
The most common disability affects mobility, and it impacts one of every seven individuals. Mobility issues are even more common in adults aged 65 and older, and they impact two of every five individuals in this age range. Other common disabilities affect cognition, hearing, vision, independent living, and self-care.
While the wealthiest individuals may be working because they want to, the majority of people work because they have to. People who can’t work don’t get paid, leaving them unable to pay for shelter, food, transportation, and other living expenses. Disabled people without an income could end up filing for bankruptcy or becoming homeless.
How Disability Insurance Works to Protect Your Income
You may get disability insurance from your employer as a standard or voluntary benefit. You will lose this benefit once you leave the company. You can purchase an individual disability plan that will remain in force as long as you keep paying the premium.
Most disability policies pay you a percentage of your income if you become injured or ill and can’t work. If you purchase an individual disability policy, you can choose the level of benefit that suits your needs and budget.
Some disability policies replace a portion of your income for a limited period, while others pay for an extended time such as a year or longer.
Disability income provides some level of income to help you pay your bills. In the event you can’t return to your previous employment, disability payments may give you enough income to tide
There is no limit on how you can use your disability payments. For example, you can use them to pay your mortgage, utilities, groceries, debts, childcare, and even make retirement contributions.
Considerations for Buying Disability Insurance
We’ve put together the following list of questions for you to consider when getting quotes for disability insurance:
Will the disability limits you’ve selected keep pace with inflation?
Is the benefit amount sufficient to support your current lifestyle?
Will the benefit meet your short- and long-term needs?
Can you add a partial disability rider?
How long does the benefit last?
Where your budget is a concern, it’s better to have a limited amount of disability insurance rather than none at all when you consider the risks of becoming disabled.
As the Employee Benefit’s Department Manager at Leap | Carpenter | Kemps Insurance Agency, I use my 20 years of insurance expertise and background in Human Resources Management to find the best policies for both business owners and their employees.
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Leap | Carpenter | Kemps Insurance Agency provides Commercial Business Insurance, Employee Benefits, Life and Health Insurance, and Personal Insurance to all of California, including Merced, Atwater, Los Banos, Mariposa, Madera, Fresno, Modesto, Turlock, and Stockton.
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