Most Americans are Not Prepared for a Disability
Disability can happen slowly or instantly, but very few people are ever fully prepared to deal with a partial or complete impairment. Most people think it will not happen to them, but statistics show that most people are more at risk than they think.
A man named Joshua had enjoyed mechanical work from a young age. As soon as he finished high school, he started working at an elevator repair business. With his existing skills, he quickly learned the trade and thrived in his job. After five years on the job, an elevator fell on him. This put 700 pounds of impact pressure on his back. Despite the lack of initial pain, he lost the feeling in his legs and knew that something terrible had happened.
When he arrived at the hospital, the doctors informed Joshua that he had suffered a spinal injury, which would confine him to a wheelchair forever. Joshua was able to collect workers’ compensation, but his sudden disability impacted his family in many ways. His mother left work to care for him, and this limited the family’s income. After three years of rehabilitation programs and individual determination, Joshua was able to gain enough strength to move around on his own.
Joshua stressed that people can never know what will happen to them from one day to the next. He also said that since he was under the age of 30 at the time of the accident, he had never even thought about disability insurance. His advice to all people, young and old, is to start thinking about it now.
Not all people can collect workers’ compensation when they become disabled. Monica, a woman nearing the age of 40 and working in the financial field, experienced a disability after stepping off a porch and falling on the wet ground. She tried to brace herself, but she wound up shattering her elbow badly enough that it required surgical repair. There were complications, and she developed osteonecrosis following her surgery. This is a condition of dying bone tissue, which resulted in Monica becoming wheelchair bound.
Monica had to hire someone to help her with dressing, bathing, eating, toileting and other basic tasks. She said that the financial effects of her disability were devastating. Although she was able to gain approval for Social Security Disability, it took well over two years to start receiving payments. Her retirement nest egg was depleted paying her basic living expenses during that time. She could not afford her rent and was unable to work. Monica kept her spirits high despite the pain and expressed her appreciation for the support received from friends, family and health care providers.
Since injuries are unpredictable, it is important to be prepared. People who are injured at work may be able to collect workers’ compensation, but Joshua’s story shows that those funds are not enough to cover all expenses. Monica’s devastating story shows that even savings cannot be enough to help a person survive until SSDI benefits are received. Not all people are able to live on workers’ compensation or SSDI anyway, so it is important to have adequate disability insurance to have the assurance of regular income in the event of an unfortunate accident. Disability insurance is more affordable than most people think. To learn more about this type of coverage, discuss concerns with an agent.
Helpful Disability Riders that Policyholders Should Consider
Disability insurance riders can be beneficial. However, they may not be right for every person. It is important to discuss individual circumstances with an agent to determine whether they are appropriate or not. There are several different disability riders that every consumer should learn about.
The majority of basic policies provide income in the event of a disability preventing a policyholder from performing reasonable work tasks. If the person is able to return to work later than expected or must take a different type of job, income replacement coverage will be lost. This is the point when residual disability applies. Its purpose is to compensate for the difference between income replacement coverage and what is being earned at a new job. To avoid penalizing workers for continuing employment and facing income reductions, many insurers also include a clause for loss of earnings connected to the definition of disability.
This time period spans from when a person first becomes disabled until the first check arrives. Standard waiting periods for checks are usually about 90 days. Policyholders who cannot wait that long will have to pay extra to reduce the elimination period to 60 days. The increase is between 25 percent and 30 percent. To reduce it to 30 days, the increase is about 50 percent. By extending the elimination period, policyholders can save extra. If the period is increased to six months, the savings is about 10 percent.
Many professionals prefer this rider, which ensures their policy will pay in full if returning to the same type of work is impossible. For example, a surgeon who lost a hand in an accident would not have to take a physician’s job paying less. The surgeon would receive the full policy benefit instead. Riders usually add about 10 percent to the price of a policy. However, rates may be higher for some professions. While this type of coverage is desirable, it is not easy to find. If an insurer does not offer this coverage, policyholders can look for disability policies with loss of earnings inclusions.
Cost Of Living Adjustment
There are two ways that disability policies adjust with inflation. The first way involves a small adjustment, which underwriters blend into policies to permit policyholders to decline or accept. People who accept will see that their benefits and premiums will change in the price index. Before verifying income, insurers will usually make adjustments automatically for five years. A second option is based on cost of living, which applies if extra benefits are used after a full year of collecting disability. Policyholders may increase their benefit checks by a flat rate or a set percentage. A rider based on cost of living may increase premiums up to 40 percent, so it is important to ask about costs before selecting this option.
First-time disability policy buyers must pass a physical exam. If additional coverage is desired later on, another physical exam is required. For those who have developed new medical issues since their last exam, a guarantee of insurability rider should be sought. This will help reduce the stress of possibly being denied based on health status changes. In some cases, insurers may offer the guaranteed increase as part of the standard policy. However, some may charge up to 10 percent of the policy’s price for the rider.
This rider guarantees disability benefits past age 65. It is best to purchase this rider at a young age. As people reach the age of 40, the cost increase exceeds 25 percent.
Return Of Premium
This is the most controversial rider. It is meant to make disability benefits similar to cash-value life insurance. In some states, insurers are prohibited from offering this type of rider. It is meant to give some of the money a policyholder invests back to the individual. For example, after a period of several years, a person might get 80 percent of the premium back if desired. However, the privilege comes with a cost that may be as much as 50 percent more than the standard policy’s price.