Reprinted from the Health District's quarterly publication mailed to district residents (Winter 2001)
TOPIC: Protect your salary now
Sudden disability can take financial toll
by karin meyer

It often takes a serious accident in the family before the need for disability insurance hits home.

You take a turn too fast on the slopes during a weekend ski trip and end up fulfilling a co-worker's flippant suggestion to "break a leg." (Oh, and come to mention, you need your legs to work at your job as a landscaper.) Your Uncle Bob, a dentist, slices open his hand — one of the "tools" in his profession — while adjusting the blade on the lawn mower.

The disability, as you can see, can vary in type and severity. But the end result on your ability to make a living is the same: When you are seriously injured, your income stops (for a period of time). In the meantime, your medical bills pile up and, without insurance, you are forced to tap any savings you might have.

But it does not need to come to that. Understanding the need for disability insurance now is a sound investment in your future and your ability to support yourself and your family.

"A lot of people don't realize (disability insurance's) main purpose. You insure your life, your house, your car, but the thing of most value is your ability to earn a living," said Joyce Kiskis, whose Fort Collins insurance agency sells a variety of policies covering health, life and disability.

Consider this: At age 40, the average worker faces only a 14 percent chance of dying before age 65 but a 21 percent chance of being disabled for 90 days or more, according to the Insurance Information Institute.
what to consider

In buying a disability insurance policy, consider the following:

  • Definition of disability — policies vary. Premiums vary if you can't work in your chosen profession vs. any gainful employment.

  • Extent of coverage — Accidents and/or illness.

  • Size of benefits — the monthly benefit is a percentage of your income.

  • Waiting period (30 days, 60 days, 90 days, 180 days are typical options — how long a disability must last before benefits become payable. The longer the waiting period the lower the insurance will cost. 

  • Length of coverage — how long benefits will be paid (2 years, 5 years, 10 years, to age 65, are common increments).

  • Extent of disability — partial vs. total disability.

The personal costs of a disability can take many forms — physical, financial or emotional. Disability insurance provides monthly income (typically up to 65 percent of your pretax income) to pay for basic living expenses if you become disabled due to an accident. Unlike worker's compensation, which only covers people who are injured on the job, disability insurance covers you in the event, you are injured or become ill wherever you are.

"It protects your salary," Kiskis said.

Keep in mind, though, that disability insurance doesn't replace your whole salary. Even with insurance, many people struggle to make ends meet after a disability in the family.

Who should buy disability insurance? Anyone who is the breadwinner of the household and needs income protection.

Here are scenarios for individuals and families who could benefit from disability insurance:

·  Single people who are especially vulnerable since they don't have a spouse's income to fall back on. They also may not want to depend on their parents or friends for financial support in the event of a disabling event.
·  Couples with children where one parent is the primary provider and the other parent does not work outside of the home.
·  A two-income couple who could not get by on only person's income.

People's idea of disability often can distort how they view and value disability insurance. Not every accident results in someone needing to use a wheelchair. Injuries can be debilitating to varying degrees and, depending on your line of work, can impact how able you are to perform your job. Some disabilities are permanent; others are short term.

Large employers often offer disability insurance as part of their benefits package. People who don't have access to disability insurance through an employer can buy an individual policy through an insurance agency. The policy buyer, whether it be the employer or the individual, reaps the tax benefit once the benefits are paid out. Premiums are based on a person's age, health and risk level of occupation.

How much disability coverage you need depends on the lifestyle you and your family have. This includes rent or mortgage payment, food and automobile or other expenses. An insurance agent, financial counselor or your employer's human resources person can explain options in coverage.