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Disability insurance: One of the most valuable and overlooked workplace benefits

Posted at 4:55 PM, Oct 15, 2019
and last updated 2019-10-15 16:55:27-04

One of the most valuable and overlooked workplace benefits is disability insurance.

According to the Social Security Administration, one in four Americans will be disabled at some point during their lives. This could be due to an injury, back or joint pain, pregnancy, or in the worst case, a long-term, more chronic condition.

Carl Carlson, CEO of Carlson Financial said many workers are severely under-prepared for that event. Some could use their accrued days off or sick leave but that is likely a short-term fix, if they even have sick leave.

Otherwise they would take unpaid time off and have to rely on savings, or even friends and family. As we recently saw with the government shutdown, many Americans are living paycheck to paycheck.

Disability insurance, like any insurance, is a transfer of risk. You pay a monthly premium so that if disability does happen, the insurance company pays you, typically 40-60% of your lost wages, Carlson said.

Short-term disability can kick in within one to two weeks after someone is unable to work and usually lasts three to six months. Long-term disability generally doesn’t start until three to six months after the disability began and can last until you go back to work or even until you reach age 65, depending on the policy.

Carlson said a lot of people need disability insurance. The average disability lasts 34.6 months, almost three years. Many people are able to forego a short-term disability policy but having an adequate rainy day fund, but if you can’t afford to not have an income for an extended period of time, you should have disability insurance.

The types of policy and coverage amounts will vary depending on individual circumstances: how much in savings, single earner or dual-income family, fixed expenses, etc.

So, where should one get a disability policy? Carlson said first see if your employer offers a group policy, which will likely give you the best rates and it’s often more affordable than you might think.

If your employer doesn’t offer, get quotes from an insurance broker or an insurance company directly.