For most of us, the idea that we could become disabled due to an illness or injury seems pretty remote. But no matter how many times we tell ourselves, “It will never happen to me,” there’s no getting around the fact that it does happen — everyday — to people just like us.
Know the Odds
For an insured worker born in 2000, the likelihood of becoming disabled before normal retirement age is 1 in 4, according to the U.S. Social Security Administration. The most common reasons for long-term disability claims are musculoskeletal disorders (27.6%), cancer (15%), injuries (12%), mental health issued (9.3%) and circulatory ailments such as heart attacks and strokes (8.2%).
That’s why it makes so much sense to protect yourself and your loved ones from the financial impact a disability could have during your working years. After all, how long would you be able to make ends meet if we were out of work for a month, a year, or possibly even longer?
How Much Time Can You Afford?
According to the Council for Disability Awareness, the average long-term disability claim lasts almost three years. Yet, the same organization found that only 40 percent of U.S. households have enough in liquid savings to cover just three months of expenses without income. Three out of 10 adults couldn’t pay an unexpected $400 bill without a credit card or other help.
It’s little wonder that, according to one study, 44 percent of those filing for bankruptcy cited medical-related losses as a contributor.
While Social Security may seem like the obvious solution, benefits are limited to long-term disabilities and there is a six-month waiting period before payments begin. Also, less than a third of claimants have their Social Security Disability Insurance (SSDI) approved.
If you’re fortunate enough to be approved, the income you receive may not be enough to cover the mortgage, pay medical bills, or meet any of your other day-to-day needs: The average SSDI benefit for a disabled worker as of February 2021 was $1,279 a month, or just over $15,000 a year.
Workers’ Compensation Is No Guarantee
Workers’ compensation is another program that provides disability benefits, however not all employers are required to participate. What’s more, most disabled individuals will only qualify for benefits if they were injured on the job or become seriously ill due to a work-related activity.
Injuries or illnesses that take place in the home are generally not covered under this program, and less than 1 percent of workers missed work because of an occupational illness or injury.
Other Sources of Coverage
There is, of course, another potential source of disability benefits. You may have access to disability coverage through an employer-sponsored plan. However, employer-paid plans are often generic in nature and may not have all the features and benefits you need.