Insurance Tip #9: Disability insurance may be the most overlooked part of your financial plan
If you knew the data, you would take a hard look at disability insurance. Now is the right time since you probably don't have any disability coverage.
There is about a 40% probability that you will have at least one disability that lasts three months or longer before you reach age 65.
Women are more likely to become seriously disabled than men.
The most likely cause of disability is illness, not an accident.
The most common cause of disability is back injury.
More than seventeen million Americans have a disability that limits or affects their ability to perform their work.
Nearly 20% of Americans will become disabled for one year or more during the course of their employment.
If you become disabled, you may be partially covered by Social Security Disability Insurance, by Worker's Compensation (if you were injured at work or if your illness was work related) or by other state and federal programs.
You can purchase disability insurance individually, although it can be quite expensive. If you pay the premiums yourself, then any benefits you receive will be tax free, which is not the case with an employer-paid group policy.
If you are interested in disability insurance, first check to see if it is provided by your employer. Many large employers offer it at no cost.
If the no-cost option is not offered, you might still be able to obtain disability insurance through your employer if you pay for it. It's usually less expensive to purchase it this way.
If you have no employer-sponsored disability options, you might be able to obtain insurance through a professional organization's group plan. These plans are also less expensive.
You will need to consult with an agent who specializes in disability insurance. Insist that your policy be placed with a top-rated insurer, known for the fair settlement of claims. Berkshire Life Insurance, a subsidiary of the Guardian Life Insurance Company, and Northwestern Mutual would be good places to start.
Dan Solin is the author of The Smartest Investment Book You'll Ever Read (Perigee Books, 2006) and The Smartest 401(k) Book You'll Ever Read (Perigee Books, 2008).