Wondering if you can afford disability insurance? While it’s understandable to be concerned about adding an additional expense to your monthly budget, financial statistics on long term disability insurance costs indicate that this important type of insurance coverage is among the most affordable and necessary investments you can make in your financial future.
The cost of disability insurance is much less than most people assume it will be. Disability insurance premiums could be compared to a percentage of earnings and quality coverage typically might run between one and four percent of the policy holder’s yearly income. The exact price may vary based on specific benefit selection, occupation class, health history and policy options chosen.
Considering the potential financial implications of a disability, the cost of a disability insurance premium is quite affordable. Rather than wondering if you can afford the cost of premiums, you might be better served to ask yourself how you could afford to pay your mortgage and other living expenses if you were to become disabled and unable to work. When you look at the cost of disability insurance rates from that perspective, a better question to ask is if you can afford not to have a disability policy.
Limitations of Group Disability Insurance
Even if you have access to an employer sponsored disability insurance plan, it’s generally in your best interest to elect to take out an individual disability insurance policy. Protecting your income is such an important part of sound financial planning that it’s necessary to make sure that you’re protected by a comprehensive disability policy that isn’t tied to continued employment with a particular company. Fortunately, disability insurance rates are quite affordable, so it isn’t difficult to afford the protection you need. Drawbacks of Employer-Sponsored Disability Policies:
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Lack of Portability: If you change jobs, you likely won’t be able to take your disability insurance policy with you when you leave.
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Taxable Benefits: If your employer-sponsored policy premiums are paid by the company, any benefits that you receive under the plan are treated as taxable income.
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Benefit Caps: Employer-sponsored disability plans often have caps on benefits that don’t provide significant protection for those who earn higher salaries.
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Integration of Benefits: Disability insurance policies sponsored by employers aren’t stand-alone policies. This means that the benefits that you receive under this type of coverage can be reduced if and when you qualify for payments under government disability plans, such as social security or state programs.