Long-Term Disability Insurance Myths
First, let’s define Long-Term Disability Insurance: LTD Insurance, sometimes referred to as Income Protection Insurance, works to protect your source of income in the event of illness or injury that may cause you to be unable to work.
Myth 1: My home or 401k is my most valuable asset.Fact 1: Your ability to work is your most valuable asset.
While your home or your 401k may be your most valuable possession, your ability to go to work every day is by far your most valuable asset. Think about how much you are going to make over the lifetime of your career. Then imagine you are unable to work, and all of that potential income disappears because you didn’t have the necessary coverage in place. There is a possibility that at some point in your life, you will be unable to work for an extended period of time due to injury or physical or mental illness, and not having a form of income protection in place can be detrimental to your financial well-being. Having a Long-Term Disability policy can help minimize the stress of being unable to earn a paycheck by ensuring you have money to pay your bills, while possibly allowing you to still put money into savings.
Myth 2: I don’t need Long-Term Disability Insurance because my profession isn’t dangerous.Fact 2: You never know what surprises life is going to throw at you.
Yes, not everyone has a “risky” job that could be detrimental to you and your loved ones, but life happens and your ability to work could change at any moment. Long-Term Disability Insurance covers you in the event you become injured in or outside of the workplace, physically sick or mentally ill and cannot work for an extended period of time. These last two years alone have shown us that unexpected events can occur, and it can be difficult to know how long you will be affected by them. No matter what your occupation or salary, you should look into protecting your income – especially if you are the primary income earner in your home. These life events are impossible to predict, but you can plan for them by having the correct coverage in place to keep you and your family financially secure.
Myth 3: I have group coverage through my employer, so I don’t need to purchase more.Fact: Group coverage typically only covers 50% of your income and is taxed when you use it.
It is very common for employers to offer Long-Term Disability insurance for their employees. Unfortunately, this group coverage typically only covers 50% to 60% of your actual income, and the money you receive from this coverage will be taxed. You need to really ask yourself, could I live off of less than 50% of my current income? A way to answer this is by considering a common topic in the insurance world: HUG planning – Housing, Utilities, and Groceries. If you could still pay your mortgage or rent, cover your utilities and afford groceries living off of your employer’s group Long-Term Disability Insurance coverage, that’s a great start. Adding a supplemental plan will allow you to cover your HUG, while also allowing you the possibility to continue saving and investing in the event you are unable to work.
Bonus Tip: If you’re on an LTD claim collecting from your employer group plan, you can no longer contribute to your 401k.
In a nutshell, Long-Term Disability insurance is something that everyone should consider no matter your health history, your profession or what employee coverage you might already have. Having to deal with a disability that is affecting your life is stressful, but you can ease that stress by knowing you’ll be able to cover your bills. Check out our blog on Why It’s Important to Consider Long-Term Disability Insurance to learn more or schedule an appointment with a Life Insurance Specialist, (like me!), to discuss options for your specific situation. We want to make sure you always have financial peace of mind, no matter where you are in your life’s journey.