Disability Insurance Worth It the Long-Term Coverage Can Pay off Big Time

By Michelle Andrews Tribune News Service | The Spokesman-Review (Spokane, WA), October 17, 2017 | Go to article overview

Disability Insurance Worth It the Long-Term Coverage Can Pay off Big Time


Michelle Andrews Tribune News Service, The Spokesman-Review (Spokane, WA)


"It won't happen to me."

Maybe that sentiment explains consumers' attitude toward long-term disability insurance, which pays a portion of your income if you are unable to work.

Sixty-five percent of respondents surveyed this year by LIMRA, an association of financial services and insurance companies, said most people need disability insurance. But the figure shrank to 48 percent when people were asked if they believe they personally need it. The proportion shriveled to 20 percent when people were asked if they actually have it.

As the annual benefits enrollment season gets underway at many companies, disability coverage may be one option worth your attention.

Some employers may be asking you to pay a bigger share or even the full cost. That can have a hidden advantage later, if you use the policy. Or you may find that your employer has automatically enrolled you - or plans to - unless you opt out. A growing number of employers are going that route to boost coverage that they feel is in their employees' best interests.

Benefits consultants agree that although long-term disability coverage lacks the novelty appeal of some other benefits, it can prove much more valuable in the long run.

"This is a really critical safety-net benefit," said Rich Fuerstenberg, a senior partner at human resources consultant Mercer.

If you become disabled because of accident, injury or illness, long-term disability insurance typically pays 50 to 60 percent of your income. The length of time the policy pays varies; some policies pay until you reach age 65.

Long-term disability generally has a waiting period of three or six months before benefits kick in. That period would be covered by short-term disability insurance, if you have it.

Many long-term disability claims are for chronic problems such as cancer and musculoskeletal conditions. According to the Council for Disability Awareness, the average duration of a claim is nearly three years.

Not everyone has savings to support them through that time. When the Federal Reserve Board surveyed adults about household economics in 2015, 53 percent said they don't have a rainy day fund that could cover them for three months. More troubling, nearly half of respondents said faced with a hypothetical $400 emergency expense, they didn't have the cash to cover it.

According to the Social Security Administration, 1 in 4 people who are 20 years old now will be disabled before they reach age 67. …

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