What is the largest asset you will ever own? Your car? Your home? Your retirement account? Nope, the biggest asset you will ever own is your ability to earn an income. You and your family members have the ability to make millions of dollars over your lifetimes, so why wouldn't you protect your earning potential in the same way you protect your home and auto? The logical answer is that you know you should protect yourself, but feel invincible.
The expert risk managers at Employee Owned Benefits in Mount Vernon, WA feel supplemental disability insurance policies protect you and your family should injury or illness keep you from working for a short or long period of time. When your income stops, this insurance kicks in to help you pay your rent or mortgage and other key living expenses. If you became ill or unable to earn an income for an extended period of time, how would your household pay bills and meet basic needs?
Some common instances of disability are as follows:
- You are sick, injured, or have a disabling condition due to pregnancy or childbirth and cannot work.
- Your child, parent, spouse, or registered domestic partner needs your care due to a serious health condition.
- You would like to bond with your new child (biological, foster or adopted child).
Your chances of being disabled at some time during your working career are probably higher than you think. According to the Social Security Administration's Disability Benefits brochure, "Studies show that a 20-year-old worker has a 3-in-10 chance of becoming disabled before reaching retirement age." Disability insurance is designed to protect your livelihood if your most lucrative asset is disabled.
- Individual income replacement policy: disability insurance pays you benefits if you can't work because you're sick or injured. Some individual policies pay partial benefits if you can only work part-time due to sickness or injury. Disability insurance policies specify how much you will be paid, how soon after you are disabled benefits will begin, and when benefits will end. Policies generally provide replacement of 50 to 70 percent of income.
- Employer-provided income replacement policy: Many employers offer disability insurance as part of their employee benefits program. If your employer pays the premium, you will pay tax on any disability benefits you receive. If you purchase disability insurance yourself, and pay for it out of your own pocket with after-tax dollars, the benefits you receive are generally tax free.
- Income replacement for self-employed persons: Many entrepreneurs are dedicated to starting his or her own business that he or she ignores disability insurance planning. Self-employment creates certain nuances that should be highlighted in this discussion. Entrepreneurs may take on the roles of employee and employer and can shelter taxes by providing employees with disability insurance options as well as protect his or her own earnings through an individual disability insurance policy.
Confused by all of this? Consider discussing your options for income protection with a trusted insurance agent. Waiting because you think disability will never happen to you is what leads many workers into bankruptcy. The day to properly cover your earnings is before disability strikes, not after.