3 Harsh Truths about Disability Insurance: Why Your Coverage May Not Be Enough
3 harsh truths about disability insurance
Spoiler alert - you're probably not covered (enough).
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If you're in your working years, your largest asset just might be your ability to generate income.
Protecting yourself from being unable to work for an extended time due to injury, illness, etc. should be on your to-do list.
Some folks may be able to “self-insure”, i.e., fund living expenses with assets on hand.
For many, though, not being able to work for months or years would be a catastrophic hit to their family’s finances.
This is where a long-term disability policy can help.
“Oh, I have disability insurance through my work. I’m covered.”
Are you? 🤔
Potential problem areas:
Benefits may be less than you need. || Read your employer’s policy. What situations does it cover? When does it kick in and for how long? What's the payout (benefit)? It may be less than you think. Will this cover you and your family if you're unable to work for an extended period?
Benefits are probably taxable. || Long-term disability benefits paid as part of an employer’s group policy are generally taxable. You can’t work, your disability benefits are a fraction of what your pay was, AND those benefits are subject to tax? Yikes! 😲
The policy may not pay out if you’re able to work AT ALL. || Understand the concept of “Own Occupation” vs “Any Occupation”. An “own occ” policy is designed to cover you if you’re not able to do YOUR job. An “any occ” policy will likely only payout if you’re not able to do ANY job that you’re reasonably qualified for. For folks in more specialized, higher-paying fields, an “any occ” policy may essentially be worthless. Employer-provided plans are often the “any occ” variety.
The solution to all of the above?
It may be to purchase a policy on your own that will provide more appropriate coverage with non-taxable benefits.
