Disability insurance is an often overlooked major component of
the estate plan of a young two-career couple.
In one respect, disability insurance may be even more necessary
than life insurance. Consider this difference: A deceased spouse is
no longer producing income, but also is no longer consuming the
On the other hand, a disabled spouse may cease producing
income, but will continue to consume the family income and may
consume even more than before as a result of medical care and
special needs arising from the disability.
A spouse's long-term disability can cripple a family's finances
far more seriously than a spouse's death.
Statistics show that if you are 35 now, there is a 1-in-3
chance you will at some time in your life become disabled for a
period of three months or more. Furthermore, your chance of having
a long-term disability before age 65 is greater than your chance of
dying before that age.
Most people simply have no idea what protection is available if
they become disabled through illness or an accident. They are
unaware of the different meanings of disability as the law and
insurers define it. They don't know what kind or the amount of
protection to buy.
A competent estate planner can make recommendations to a client
Many working people are covered by some kind of government or
employment disability plan.
Government protection plans include state workers' (workmen's)
compensation, state sickness disability, Social Security, veterans'
benefits and insurance policies for people in the armed forces.
But most of these will not provide more than a subsistence
level of support, and some programs are limited to those with low
Workers' compensation covers only accidents or illnesses that
occur as a result of the job. Only a few states have compulsory
coverage for disabilities that occur as the result of
non-occupational injuries and illnesses. By and large, government
benefits will not meet your family's support needs.
Your employer may offer some disability protection. Many
employers will voluntarily continue an employee's salary for a
period of time during disability or will supplement government
disability payments. But this aid is not likely to continue for
more than a few months in the absence of a contractual obligation.
Some group health plans include disability income provisions
that pay a percentage of salary. An example of such a provision is
one that pays 50 percent of salary for 20 years or until age 65.
Pension plans and profit-sharing plans also may provide
disability coverage. Be sure to check with your employer to find
out what coverage is offered.
But a young two-career couple may not have worked long enough
to qualify for these benefits. In any event, it is likely that
individual disability insurance will have to be obtained. …