Protect Your Earning Power
Providing for the family is tops on almost everyone’s list. But even if your job is secure, an accident or unexpected illness could make it all go away.
Facing the Facts
When you’re in the pink of health, it’s hard to believe something could happen to prevent you from going in to work every day. But reports show otherwise:
- Thirty percent of Americans 35-65 will become disabled for at least 90 days in their lifetime.
- Social Security benefits are far from comprehensive and may be tough to get in any case. In 2009, for instance, only 37% of initial disability claims were accepted by Social Security.
- Even if you participate in a plan at work, group disability plans usually pay only 60% of your monthly salary—and have a monthly limit on the amount of benefits that will be paid.
- Most group policies are not portable.
- Your health can change and that may preclude you from obtaining individual coverage.
- Most self-employed individuals have no group coverage at all.
Check Your Coverage
Confirm your current status before choosing an individual plan. Some stats:
- About half of mid- to large-size firms offer group coverage plans with benefits that last for at least five years. See if yours is one of them.
- Five states, including New York and New Jersey, require employers to provide short-term disability, known as sick leave, up to 26 weeks. (But no states require companies to offer long-term disability.)
- Even with group coverage kicking in, it may be tough to live on just 60% of your salary. And bonuses may not count. An individual plan may provide the extra 10-20% (or greater) you need to close the gap.
What to Look for
Sift through all the options. It’s not just about cost:
- Choose a plan from a solid company that will be around if you need to file a claim down the line.
- Make sure it has a broad definition of disability. You don’t want one with criteria so strict that it’s virtually impossible to collect benefits.
- Evaluate both short-term and long-term plans in light of your group coverage (if you have it) to choose the one with a wait time that makes the most sense.
- Double-check that the policy is renewable at the same rate as long as you pay your benefits on time and that the company cannot cancel it for any reason.
When April 15 rolls around, make sure you’ve factored in these key points, whether you’re the company owner or an employee:
- If you’re a business owner, remember that premiums paid by the firm for both group and individual policies are tax-deductible if the benefits are paid to the employees.
- The amount the company pays for the premium is not taxable to the employee, but the benefits are considered part of the employee’s gross income if collected.
Your ability to punch in every day is your most valuable asset. Speak with your financial adviser to find an affordable plan to safeguard it. You may sleep better at night.