Insurance: it's everywhere. We have car insurance, home owner's insurance, health insurance, life insurance, even insurance for things like jewelry and baseball cards. The reason we have so many types of it is simple: insurance is synonymous with protection in case of the worst.
One type of insurance that many people don't consider is disability insurance. While not as common as other types, it is still very important and allots people protection that they hope they never need to use.
What is Disability Insurance?
Disability insurance is a type of insurance that protects you financially in the event that you become ill or disabled and are unable to work. It helps provide you with compensation from lost wages so that you can continue to pay your bills, your mortgage, save for retirement, pay tuition, and purchase everyday necessities, such as clothing and food.
Who Should Purchase Disability Insurance?
According to the US Department of Commerce, Economics, and Statistics Administration, one in five Americans are disabled: one in ten are considered severely disabled. While some of these disabilities are the result of birth defects or genetic diseases, many are the result of accidents or other incidents. In other words, disability can happen to anyone.
Many disabilities involve physical ailments, such as long-term disease or damage to a wrist joint, but disability isn't always something that can be seen: having post-traumatic stress disorder or another mental illness, for instance, can interfere with your ability to perform a job and may therefore be considered a disability.
With the term "disability" having a wide range of definitions, as well as the fact that no one is immune to it, disability insurance is a wise choice for anyone. However, people who work in certain occupations (such as construction or transportation) where accidents are more likely may further benefit from disability insurance. Your risk of disability goes up as you age, so those who are over 40 may further benefit as well.
What About Disability Insurance Through Work?
Your place of occupation may offer disability insurance, allowing you to purchase it through your employer's group benefits plan. However, this may not always be the best decision. Depending on your place of business, your employer might offer you a plan that limits your coverage under the Employee, Retirement Income Security Act (ERISA). While the ERISA protects insurance companies, it doesn't offer a great amount of protection to the insured. For this reason, many people are better off purchasing an individual plan. Even so, any type of disability insurance (employer based or individual) is better than none at all.
What Kinds of Things Should be Considered When Purchasing Disability Insurance?
An agent or lawyer who specializes in disability law or disability insurance can help you procure a plan that is right for you. However, in general, there are several things you should look for in a plan, including: portability (your ability to keep a plan if you change jobs), your premium (some carriers may allow you to lock in a premium price, others will not), adding a rider (such as cost of living benefits and future increase options), residual benefits (these may apply if you are able to work part-time), renewability (ability to retain your coverage after it expires), collection time of benefits, and the ability for your insurer to make coverage changes.