Disability Insurance: Debunking the Myths

As the cost of healthcare continues to rise, it’s easy to forget that there’s more to life than covering potential healthcare costs, not considering the insurmountable need to earn a living.  Ask yourself this question: If the primary earner in your family was unable to work for a substantial amount of time, how would you pay the bills?

This is where disability insurance comes in. Unfortunately, this type of insurance comes with its own set of myths and lore, so let’s set to work at separating fact from fiction.

Myth #1: Disability insurance covers only work-related injuries

False.  Around 90% of disability claims come from illness. Disability insurance exists simply to cover a percentage of your salary in the event of accident or illness, work related or not.  It could be in the case of a car accident, pneumonia, cancer or a household accident – an array of life circumstances that can put you out of commission.

Myth #2: If I couldn’t work, government programs like Worker’s Comp. would definitely cover me

False. Workers compensation only compensates those who have sustained a work-related injury and, according to The National Safety Council, 73 percent of long-term disabilities are not work-related.

Programs like Social Security disability protection includes a stringent process of determining who is qualified as completely disabled, and many do not make the cut. In addition, the payout may not meet you and your family’s needs. In 2018, the average beneficiary received about $1,197 a month.

Myth #3: I don’t need disability insurance because I have a great health insurance plan

False. Disability insurance meets an entirely different need. Instead of helping out with medical costs, disability insurance is in place to keep your family afloat in case of prolonged illness or accident.  It does this by paying a percentage of your salary so that, while your health insurance helps with the medical bills, disability insurance can help with the mortgage, your kids’ educational costs, your electric bill, etc.

Myth #4: Disability insurance is included in my group health plan, so I’m covered.

True and False. Group plans or employee-sponsored group coverage may certainly include disability coverage. However, it’s important to be educated about your disability coverage within a group plan. For instance, group policies often cover catastrophic events only, and will not follow you to another job or in the even that you are let go, as an individual policy would.

Myth #5: It’s highly unlikely that I would ever need disability insurance

False.  1 in 4 people will become disabled prior to retirement.

Myth #6: I should wait to think about getting disability insurance

False:  The cost of disability insurance is determined by your health, age and income.  So, not only would it be advisable to purchase this product at your youngest and healthiest but, if you wait until you become disabled, you may become uninsurable.

Myth #7: Disability insurance does not pay out immediately and only for a limited amount of time

True. There is a period of time, as dictated by your particular policy, that will determine what’s called your “elimination period”.  The elimination period is a waiting period between 30-60 days before your disability insurance kicks in. Further, your disability policy will only pay out for a finite amount of time. Typically, 1-2 years for a short-term policy or 2-5 years for a long-term policy.

Your capacity to work and earn a living may just be the single most important asset you own, so it’s important to protect that. Ideally, none of us will face any kind of adversity or interruption to our ability to work, but life has a tendency to happen despite our best laid plans, so it’s important to consider how to protect yourself. Disability insurance is one of the most important ways of doing so.