Disability Insurance


Do you know losing a job will affect your insurance? (image via fairfaxcounty on flickr)

Times are tough and the economic turmoil of recent years continues to claim jobs almost every day.  The loss of a job presents problems on several fronts, first and foremost, the loss of income.  For many people who become unemployed, this problem overwhelms any others and makes it difficult to see how losing a job impacts other areas of your life.  Unfortunately, not dealing with these other areas can lead to more problems down the road.  One of these areas is your insurance coverage.

The last thing you need when you lose your job is to add to your family’s financial burden by purchasing insurance policies.  However, if you are like most people, you have been getting at least some of your insurance coverage through your employer.  Some of this coverage, like health and disability coverage was provided by your employer.  Other types of coverage like life, auto, and even homeowner’s coverage were purchased through your employer.  When your job goes away, in almost all cases, so does this coverage.   You may find yourself without life insurance, auto coverage, or a homeowner’s policy which further endangers the financial future of your family.

Here are things you must consider in terms of your insurance policies when you lose your job.

Health Insurance

Most people will have the option of continuing employer offered health insurance through the COBRA program once their employment ends.  This can be a lifesaver for families where the primary insurance provider suffers a job loss.  However, be prepared to pay significantly more for the same coverage.  Shop around to see if you can find an individual policy that is more cost effective.

Life Insurance

If your life insurance was provided by or through your employer, you will need to find a new individual policy to meet your life insurance needs.  This should be a top priority in order to protect your family’s future.  Temporary loss of your income is challenging enough; don’t take the chance that the worst happens and your family must figure out how to move forward without you while also dealing with the permanent loss of your income.

Disability Insurance

Life insurance is important, but disability coverage is just as important, especially for those in their middle years with families.  People in this age group are actually more likely to become disabled than to die, according to the Social Security Administration. This means that protecting your family’s finances may mean you need to secure a disability insurance policy that is separate and distinct from your employment.

Auto and Home

Many employers offer group insurance coverage for auto and homeowner’s policies that enables their employees to purchase this coverage at a discount.  When your employment ends, these policies may remain in effect but the cost to keep them may increase because you are no longer part of the group.  There is also a chance that this coverage will no longer be available.  Make an appointment with your insurance agent to discuss these policies and make sure you have the coverage you need at the best possible price.

Losing a job is difficult enough; make sure you don’t compound the problem by failing to attend to your family’s insurance needs.

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Are you properly insured in the event you become disabled? (image via goingslo on Flickr)

Many working Americans don’t have the right insurance in place to provide their family with the protection they need.  If you asked most people in their 30’s and 40’s what kind of insurance they need in order to protect their family, they would likely answer auto, home, and/or life insurance.  While these types of coverage do provide protection and are a necessary, they don’t cover all the bases by themselves.  In fact, people in this age group actually need another type of insurance even more than they need life insurance.  What coverage are they missing?  Disability insurance.

Most people have some kind of disability insurance through their employer but for many of us, that coverage isn’t enough to protect our family’s financial security.  The root of the problem is that people are worried about things in the wrong order.  People in this age group are aware of their own mortality and concerned about how their death would impact their families.  What they don’t realize however, is that they have a 30% chance of becoming disabled before retirement age and only a 17% chance of dying before retirement age according to the Social Security Administration.

But My Employer Provides Disability Coverage

Many people receive short term disability coverage through their employer, but if you become disabled, this coverage may not be enough. Consider this; you are the primary breadwinner for your family and become temporarily disabled, your employer offered coverage will likely only pay you 60% of your regular salary.  If your family had to get by for several months on little more than half your salary, could you do it?  This is one of the most important questions you need to answer in order to determine if you need additional disability insurance.

But I Work for Myself

If you are self-employed, that picture may be bleaker.  Would your business be able to survive without you for several months?  Would it continue to pay you the money you need to take care of your family?  Those who own their own business and who work for themselves must have some kind of safety net in place to protect themselves in the event of a disabling event.  Even if you have money in reserves to help cover your personal income, you may not have thought about how the business will continue if you cannot function in the same role you are in right now.  Understanding how this kind of event will impact you personally and your business is the key to determining how much disability coverage you need in order to have the protection you need in place.

Short vs. Long Term Coverage

Additionally, even if your short term coverage is in place and seems adequate, you may not be protected if you become disabled for a longer term or even for life.  There are two different kinds of disability coverage, short term and long term.  Short term coverage generally covers qualifying disabilities for a period that is generally less than one year and may be tied to the amount of time you have been with the company.  If you remain disabled after the timeframe covered by the short term policy, you will need a long term disability policy in order to continue receiving benefits.

Because disability insurance policies can be complex with many restrictions and a wide range of options, you should work with an insurance professional to find the right policy to provide the coverage you need to protect your financial future.

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