Why We Need Disability Insurance

A lot of people don’t know how important of disability insurance. They buy property and casualty insurance to protect their possessions (houses, cars, and furniture) and life insurance to provide income for their survivors. They don’t think about protecting their income with disability insurance. But how well could you live if you weren’t able to work? Disability is an unpredictable event, and if you become disabled, your ability to make a living could be restricted. Although you may have enough money in the bank to meet your short-term needs, what would happen if you were unable to work for months, or even years? The real value of physician disability insurance lies in its ability to protect you over the long haul.

What would happen if you became disabled?What would happen if you suffered an injury or illness and couldn’t work for days, months, or even years? If you’re single, you may have no other means of support. If you’re married, you may be able to rely on your spouse for income, but you probably also have many financial obligations, such as supporting your children and paying your mortgage. Could your spouse really support you and your family? In addition, remember that you don’t have to be working in a hazardous occupation to need disability insurance; accidents happen not only on the job but also at home, and illness can strike anyone. For these reasons, everyone who works and earns a living should consider purchasing disability insurance.

You might think that you are adequately insured against disability because you have coverage through your employer or through government programs such as Social Security and workers’ compensation. However, only 50 percent of employers cover short-term disability, and only 40 percent cover long-term disability. Government programs may pay you benefits, but only if you meet a strict definition of disability.

Here’s an idea of the benefits you may already have, as well as their limitations:
• Social SecuritySocial Security denies more than 50 percent of the claims submitted, in part due to its strict definition of disability. Even if you are deemed eligible for benefits, you still won’t begin receiving them until at least six months after you become disabled because Social Security imposes a waiting period. In addition, your benefit may replace only a fraction of your pre-disability income.
• Workers’ compensationIf you’re injured at work or get sick from job-related causes, you may receive some disability benefits from workers’ compensation insurance. How much you receive depends on the state you live in. However, when you review your disability insurance needs, remember that workers’ compensation only pays benefits if your disability is work-related, so it offers only limited disability protection. Some states also cover only the diseases or disabilities outlined in that state’s workers’ compensation laws.
• Pension plansOften these plans pay benefits based on total, permanent disability, or reduce your retirement benefit in proportion to what you have already received for a disability. In addition, remember that these benefits are usually integrated with Social Security or workers’ compensation, so your benefit may be less than you expect if you also receive disability income from these government sources.