There Really is a Fate Worse than Death

By |2017-09-14T11:21:19-07:00September 25th, 2013|

In terms dollars and cents, becoming disabled creates way more economic carnage than death.  Half of all home foreclosures are due to disability with only 2% to 3% attributable to death.  About half of all personal bankruptcies are due to disability and related health costs.  For those of you seeking access to capital to build your business, this is important information – just in case.

I don’t really enjoy reading a lot of statistics, but the numbers and the facts surrounding disability are so shocking and so little known that you may find yourself muttering, “wow – wow – wow!” as you read this.  I did.

  1. Just over 1 in 4 of today’s 20 year-olds will become disabled before they retire.
  2. 71% of American employees live from paycheck to paycheck[2], without enough savings to cushion the financial impact a disability may cause.
  3. Only 5% of disabling events are caused by an accident.  That means 95% of disability claims are not covered by Worker’s Compensation[3], either because they are illness related or they did not occur on the job.
  4. The average monthly benefit paid by Social Security Disability Insurance (SSDI) for 2010 was $1,128[4], and over half of all Social Security disability claims are initially denied.

Disability usually means double trouble with falling income and rising expenses due to medical costs.  That is the problem. Here are the questions to ask if you are considering protecting your business and family with disability income insurance.

  1. Does the policy cover “own occupation” or “any occupation?” If you are a dentist who loses a hand under an “own occupation” definition, your disability is permanent; under an “any occupation” definition it is possible that your benefits could be affected if you are able to, say, teach in your field of expertise.
  2. What is the exclusion period? How long will you have to wait until benefits begin?  Must the days be consecutive?
  3. What is the benefit period?  What benefit period should you choose?  (Hint:  About half of all disabilities that last at least 90 days last more than 5 years)
  4. Is the policy non-cancellable and guaranteed renewable?  That means the premiums and benefits can never be changed as long as the policy premiums are paid.

The kind of work you do and the kind of coverage you design based on these questions will determine what your premium costs will be.  Disability may not really be a fate worse than death, but the statistics tell a tale of financial disaster for you and your family if you are unaware and unprepared.

[1] Social Security Fact Sheet, March 18, 2011

[2] American Payroll Association, “Getting Paid in America” Survey, 2008

[3] Council of Disability Awareness, Long-Term Disability Claims review, 2011

[4] Social Security Administration Report, 2010