Protecting your family from financial catastrophe is one of your most important jobs as a parent. And long-term disability insurance is a critical part of that protection. Here’s how it works and why you need it…
Think quick! What’s your most valuable asset?!
Your house? Smart answer!…
…But wrong. The right answer is YOU! Gahhh!
I’m not following that up with a motherly kiss on your cheek. But I am totally serious.
Your most valuable asset is your ability to earn a living
Your ability to earn a paycheck is your single greatest asset. Without that, everything else falls apart.
According to the Social Security Administration, there is a 25% probability that you’ll be unable to work at some point in your career.
Maybe it’s childbirth complications…
Or a diagnosis you never wanted to hear…
Or a nasty snowboarding accident.
Whatever “it” is, there’s a much higher probability of “it” happening than getting hit by a bus.
There’s “only” a 7% chance of you dying. And I bet you have life insurance. (You DO have life insurance, right?)
But if you’re like most people, you don’t have long-term disability insurance.
Why your employer’s disability insurance is not enough
Yes, you probably have some through work.
But your employer’s “free” disability insurance is not enough.
Your employer’s insurance covers 60% of your salary.
Your bonus and commissions don’t factor into your disability benefits.
After your expenses go through the roof, and then you have to live on even less than 60% of your normal cash flow.
The solution is to get your own long-term disability policy
Getting your own supplemental long-term disability insurance will increase your coverage from 60% to 70%.
(You can’t get MORE than 70% of your current salary because insurance companies don’t want to incentivize you not to work).
An extra 10% may not sound like much, until you consider that the average disability claim is 3 years.
That extra 10% will really add up over 3 years.
How much is supplemental long-term disability insurance?
Insurance prevents financial catastrophes. Without the right insurance, a financial catastrophe can irreversibly impact your family’s future for the worse.
Thankfully financial catastrophes are low probability events. And that means the insurance is relatively cheap.
For a healthy 30-year-old, getting your own supplemental long-term disability policy should run $100ish per month depending on how much you make.
What about short-term disability?
Your emergency fund should be 6 months of living expenses.
Between that and the short-term disability policy you get through work, you should be okay.
Remember, insurance is to prevent financial catastrophes. Being out of work for a few months should not equate to a financial catastrophe. If it would, then schedule a call with us immediately. You’ve got bigger things to worry about.
Talk to your financial planner first
Make sure to talk to your financial planner before buying a long-term disability policy. There’s a lot of nuances to these policies and you don’t want to go it alone.
If you don’t have someone to talk to, then schedule a call with us. We help young families with this stuff all the time. (It’s literally our job.)
