Have you considered what would happen if you were unable to work for an extended period of time? We're here to ease your fears. Keep reading for a breakdown of what disability insurance is, how to find out if you're covered, and what steps you can take to prepare for a brighter future.
You've just entered the job market, or graduated from school. You understand even though you don't have much money now, that your earning years are about to begin. Thinking of your future fills you with unbridled enthusiasm. You can daydream about your perfect wedding or your perfect vacation. Even your perfect retirement. But have you daydreamed about disability? One day you're able to work, the next you're not. It might even be a temporary disability, knocking you out of commission for six months to a year. What would you do then? Do you have an emergency fund that could cover six months or more of expenses? Although no one likes to consider such traumatic and heartbreaking events, they're a real possibility. In fact, approximately 25% of people can expect to be out of work for at least a year in their lifespan.That's why it's imperative to plan ahead.
How does earning $5,000 a month sound to you? Disability insurance can be just as important as other liability insurances like life insurance, renter's insurance, and homeowner's insurance. Disability insurance protects you in case, well, you become disabled. That could span from three months to a year, or until you are retired. Disability insurance is especially important for people at the beginning of their earning years, who have barely touched their earning potential. When you're young, it's like standing at the base of a mountain. You have so much to earn, so much to climb, but what's your backup plan if something happens to you during that climb? It's imperative to have a contingency plan so you could still support your family, still experience nice things in life, and maybe even more importantly, still contribute to retirement.
Even More Options
Many people will have a group disability plan through their job. If that's you, take some time and really read the plan's terms. Does it cover your full earning potential? Does it grow with inflation or just the general cost of living? Will it pay out if your disability prohibits you from your specific, maybe technical job but not a different job? Probably not. That's why it's worth getting specific riders when you look at different disability plans.
COLA- Cost of Living Adjustment. This rider is a must for young earners. Your payout will grow with inflation, ensuring what you get paid doesn't fall short later on.This is something worth dropping as you get closer to retirement.
FIO- Future Increase Option. Say you're at the beginning of your career, and you make a fraction of what you'll earn at your peak. If you want to increase your monthly payout as your salary increases, this is the option for you.
Own Occupation- Say you're in a field with very specific mental and physical requirements, like technology, finance, medicine or law. If you become disabled, as long as you can perform any job (even though you can't perform your current job) you won't receive money from your disability insurance. You can avoid that sticky situation from the start. With this rider, as long as your disability prevents you from working in the field you're in, your plan will cover you.
Take a moment to consider what a bright future you have. Now think of the flip side and realize how much you have to lose. Disability insurance protects you from that option. It protects both your future self and future earnings.