Raise your hand if you have individual disability insurance. Go ahead, I’ll wait. No? You don’t? Annnd you have no idea what individual disability insurance even is. Time for another stroll down insurance lane!
First we need to understand the different reasons you could be eligible for individual disability insurance (IDI).
- You’re a self-employed business owner with no access to group benefits
- You have employer offered coverage with a cap
- You’re an employee not planning on staying with your employer forever
That should cover all of you in one form or another unless you’re a unicorn. Before we unpack those individually, let’s address the big elephant of doubt you brought with you.
What are the actual odds of a disability happening? Statistically speaking, just over 1 in 4 of today’s 20-year-olds will become disabled before reaching age 67, and 88% of new long-term disability claims are caused by illness rather than accident. If the stats don’t sway you, let’s frame this in a different way. An event that occurs just 1% of the time but causes 100% failure of a plan is an event that needs to be addressed. Disability insurance addresses those events. At the end of the day, our goal is to make sure you’re sealed tight in a happy little risk-free bubble.
Moving on to the different reasons you could need IDI. I’m looking at you first, business owners. You’re self-employed, maybe even the only person in the company, so you don’t have access to group benefits. Perhaps your business is new and you’ve been busting to keep it going. Or maybe you’re working on building a business legacy to leave behind. Either way, you don’t have any planning in place in the event that something happens to you (please see me after class so we can talk about business planning). Financially perhaps you don’t see where you could find a place in the budget to pay yet another bill. So what the heck are you going to do when something happens and you can’t go to work? Not only will you not be able to pay bills at work, you won’t have any income at all. Instead of trying to find a place in the budget for a premium, now you’re trying to figure out the budget without your income at all. We’ll just let that one marinate.
On the flip side of that, there’s a group of you out there with employer offered DI that are unintentionally being discriminated against because you make ‘too much’ money. Employer offered plans are trying to cover a variety of salaries and often times have a cap. If you’re a higher earner, this cap could leave you with a gap of income not covered. That can equate to thousands of dollars a month of income at risk. No Bueno.
Now for the rest of you. Mostly covered at work, you’ve never even thought about IDI. I mean, why would you? It’s already covered. Are you staying with that employer for the rest of your life? (Don’t worry, I’m not reporting back) A lot of people don’t, it’s not uncommon to move around every few years to do new things. What happens when the next employer doesn’t offer disability insurance? Had you already had even a small plan in place with increase options built into it, there’s no need to worry later.
So what have we learned? Life likes to throw plot twists at us, that’s part of the great adventure of it all. But the financial risks that come along with those twists can be daunting. It’s never too late to make sure you’re protected in the best ways possible.