top of page
  • Writer's picturePhil Kennedy

This is the Most Overlooked Insurance

The face-shielded man stood on my porch with a black case and a medical badge on his chest. I was apprehensive about his arrival because I’m always a little paranoid about inviting strangers into my home. “Hi, I’m Carlos, and I’m here for your exam.”

I had applied for long-term disability insurance about a month prior, and the underwriters require a medical exam before opening a new policy. Convinced that no one would infiltrate the New York Life information system and put on this costume to rob me, I Invited Carlos inside.

He drew my blood, took my height and weight, and collected a urine sample. He meticulously went through the 15-minute process like he had done it at least 1,000 times before. “Alright, Mr. Kennedy, sign here, and then I can submit the paperwork for your life insurance policy.” I didn’t want to correct Carlos because most of his patients probably overlook disability insurance as part of their estate plan.

According to the Social Security Administration, just over 1 in 4 of today’s 20 year-olds will become disabled before reaching age 67. Approximately 50% of foreclosures and bankruptcies are attributed to a disability. What's even more shocking is 67% of the private sector workforce has NO long-term disability insurance (and I was one of them for a considerable period).

If you are 30 years old, you are 12 times more likely to become disabled than to die by age 65. Incidentally, that’s why a disability premium is higher than life insurance premiums. You can expect the disability premium to cost about 1-3% of your annual income. The policy is intended to cover 60-70% of your annual salary, and all of the benefits are tax-free. The benefit is provided for five years or longer if the disability continues.

You're 4 times more likely to need disability insurance.

Disability insurance typically has an elimination period of several months, and the average time it takes to process a long-term claim is around 90 days. This is why it’s important to have an emergency fund in place that can cover 3-6 months of expenses. You want to be “self-insured” for a short period of time before the long-term benefit kicks in.

Many companies offer disability insurance to their employees, so that’s a good place to start. If your company doesn’t, then you’ll soon discover that you need to shop around. I’m a veteran and USAA member, so I was surprised to discover that they do not offer disability plans. Zander Insurance is a good launch point, but I would encourage you to get quotes from at least three companies.

If you’re concerned about this and other estate planning topics, then I would enjoy the opportunity to guide you through them. We can virtually meet for a free consultation and begin to inject hope into whatever issue you may be facing.

0 views0 comments
bottom of page