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Disability Insurance | 5 Critical Aspects To Consider Before You Get it or Skip it

Listed as one of the least insurance options to be picked, which renders the question is it worth it. People over 20 years have a 25% probability for disability before reaching 67 years, according to disability statistics

What’s worrying, nearly half of the adult population states that they’d have to take a loan or sell something to take care of a $400 bill.

This worrying trend leads us to analyze factors that will determine if you should or shouldn’t go for disability insurance?

Before we get into factors to consider, let’s look at whats Disability Insurance and how it works?

Disability Insurance

Disability Insurance is regarded as one of the most important financial products. It aims at paying you a monthly benefit in case you become disabled. The definition of the term disable differs from institution to institution or from policy. 

Others pay a portion if you can work part-time, others pay if you’re completely incapacitated, and if you can’t perform a job you’re qualified for. 

It’s offered on both a short and long-term basis.

Short-term disability includes;

  • Mental health issue (7.7%)
  • Musculoskeletal disorders (20%)
  • Injuries (7.5%)
  • Pregnancies (25%)
  • Digestive disorder (7.8%)

Long-term disability includes;

  • Cancer (15%)
  • Injuries (9%)
  • Pregnancy (9.4%)
  • Musculoskeletal (29%)
  • Mental health issues (9.1%)

5 Crucial Factors To Take Into Consideration to Determine If You Need A Disability Insurance

Approximately 5.6% of working Americans are prone to short-term disability every year, which isn’t work-related. The Social Security Disability Insurance approved only 23% of claims, at the initial stage, and a further 11% had to go through an appeal process or reconsideration. The average benefit was capped at $1,197/month.

  1. Work Environment

If you’re a breadwinner and are working in a profession that’s injury-prone, disability insurance should be one of the most important covers you get. It works best if you’re working in a specialized position or as manual labor, and your family solely depends on your income.

Disability insurance can cover 60-70% of your income for short-term cover and 40-60% for long-term cover.

  1. Genetically Prone Ailments

Diabetes, cancer, heart disease, mental illness, and obesity are the most prevalent genetically instigated ailments that may cause short or long-term disability. 

Statistically, 34.2 million citizens have diabetes; also, there will be approximately 1.9 million cancer diagnoses in 2021. A further 30.3 million people suffer from heart diseases as of 2018. A whopping 51.5 million people in 2019 alone were diagnosed with mental illness, and two-thirds of American citizens are either obese or overweight.

Having either of these ailments means that you may be incapacitated entirely or may not work to your optimal capability.

  1. Disability Duration

The probable term you’ll be incapacitated would influence the need to get a cover; it’s estimated one out of four 20-year-olds are likely to be disabled for three or more months before reaching retirement age.

Having an alternate source of income or an emergency fund for 3-6 months would be ideal for taking care of your bills while you recover. Short-term insurance covers 3-6 months, while Long-term insurance will cover five or longer years depending on your disability.

  1. Your Financial Goals

Should you encounter any form of disability, would you still be able to achieve your financial goals? Or be able to fund non-negotiable costs, like loans? Accidents like falling off the ladder, gun-related, heart condition, or even road accidents affect between 20-50 million people, resulting in long-term disabilities. 

Assessing your situation will give you an indication of whether disability insurance would be ideal. The disability insurance policy you opt for should cover your financial goals and any pending credit you may have. The rule of thumb is the estimated benefits should precede your current income by ten times.

  1. The Elimination Period

This duration between making a claim and getting the benefits is crucial in determining the policy cover you take. Though a more extended period is advantageous as you’ll save on premiums–this would only be ideal if you’re equipped with an emergency fund to cover you during this gap.

The short-term cover takes effect after two weeks of your disability, while a long-term cover takes between 3-6 months before you start receiving benefits. The ideal cover is long-term because you’ll be able to receive benefits for years.


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Statistics About Diabetes | ADA

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Obesity is a Common, Serious, and Costly Disease

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Naomi Olson [Website Twitter • Headshot]

I am a CFP® (Certified Financial Planner).
I have a severe phobia of bridges and dirty balance sheets.
Hobbies: blogging, meditation, and loving Bull Market (my dog).

About the author


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