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.
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.
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