In 2007, International Communications Research conducted a study for the National Association of Insurance Commissioners to see if American adults would be able to pay their bills if they were unable to work. The study showed that more than 55 percent of working American adults would not be able to cover their living expenses if they became disabled and could not work for more than a year. However, about 45 percent of the survey participants said that they had long-term disability insurance. From that group, about 70 percent said that their insurance was offered through their employers. This meant that they would face the financial difficulties of paying their own living expenses if they became unemployed.
Slightly more than 10 percent of the survey’s participants believed that they may become disabled at some point. Although these statistics were collected several years ago, the numbers have not changed for the better. In their survey report, the NAIC stated that people did not see the full financial impact of a disability. When people become disabled, they may receive up to 60 percent of their prior income through government benefits. However, a loss of income is not the only costly factor involved in a disability. If the disability stems from a long-term illness, there may be additional medical expenses that insurance does not fully cover. There may also be expensive medications. People who have limited mobility may need to hire people to help with tasks such as child care, household chores, grocery shopping and transportation.
Recent data from the Council for Disability Awareness shows that about 25 percent of people who are 20 years of age or older will suffer from a disability at some point before retirement. They said that about 12 percent of Americans are living with a disability today, and over 50 percent of disabled Americans are under the age of 65. Since so few people think that a disability may affect them in the future and reality’s statistics show the opposite, it is important for people to be proactive about protecting their financial futures from disability limitations. Employers can help their workers do this by adding disability coverage to their benefits packages. However, individuals who do not have access to employer-sponsored coverage should seek private insurance. To help Americans do this, the NAIC provided some useful guidelines.
Make a list of current and future expenses. Decide how much money is needed to make mortgage payments, cover utilities and cover other necessary monthly expenses. If investments and savings cannot cover a person’s lifestyle for more than a few years, long-term disability insurance is a must.
Research qualification criteria. For most individual long-term disability insurance policies, there are qualification criteria relating to an applicant’s medical history. Insurers may charge more or deny applicants who have chronic and permanent health issues.
It is never too early to start shopping. Young workers in their 20s and 30s often think that disabilities are only possible as they near retirement age. However, disabilities can happen to anyone regardless of age. Buying a non-cancelable disability policy at a younger age means paying a lower premium. There are also guaranteed renewable plans. These plans must be renewed despite health status but may come with increased premiums.
Understand the waiting period. Many policies come with waiting periods. This is the amount of time that a person must wait before benefits are paid. If a claim is filed before the waiting period is over, the benefits are not payable. Longer waiting periods often come with considerably lower premiums.
If a policyholder is unable to work and is deemed disabled, he or she must file a claim and provide the supporting documentation required to start receiving payments. Insurers require supporting documentation that verifies a disability. This is usually something a physician must assist with and is an essential part of being approved after filing a claim against the disability policy. To learn more about disability coverage for the workplace or for an individual, discuss concerns with an agent.