Who Should Buy Long-Term Income Disability Insurance?

Virtually all workers, whether self-employed or employed by another person or company, need access to financial resources in the event they become disabled and are unable to work for any substantial period of time. For most workers, providing for this need is one of the most critical, if not THE most critical, financial planning issue(s). A small percentage of workers may have access to sufficient financial resources, such as sizeable cash reserves or significant amounts of other marketable investments they can tap into without jeopardizing their own and their families’ long-term financial security. Additionally, a small percentage of workers may have well-heeled parents or relatives who will be able to sustain them financially if they should become disabled. In such cases, the need for disability income insurance may not be quite as critical.

For all other workers, however, the possibility of serious long-term disability is the most serious risk they face. The financial consequences are dire and the potential consequences for the workers and their families are more severe than for any other peril they face, including the possibility of their premature deaths. Therefore, assuring disability income coverage–one way or another–is an unquestionably crucial component of every worker’s risk and protection analysis. In order to perform such a risk and protection assessment, some understanding of the disability risk workers face is critical.

As most people are aware, nearly all workers with dependents feel it necessary to have life insurance so that their dependents will have sufficient financial resources to carry on in the event of the worker’s premature death.

Modern medicine is doing many incredible things. Above all else, it is keeping us alive longer! These medical advances, however, do not mean we will miss fewer days of work. 

The reality is quite the contrary. In a recent study of more than 2,000 severely ill patients from five medical centers around the country, the Journal of the American Medical Association reported that nearly a third of the families lost most of their life savings as a result of the patient’s illness. The study found that although 96 percent of patients had some form of medical insurance, 31 percent still lost their savings.

“Home care and disability costs may now be more devastating to patients and their families than the costs incurred in the hospital,” said the study. These expenses include the unreimbursed costs of home care, health aides, special transportation, and related medical costs. In addition, 29 percent of the families studied lost a major source of income, either because the patient no longer could work, or because another family member had to quit a job in order to care for the patient.

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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