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Disability insurance protects your salary in the event of incapacity for work due to illness or injury. But if you’re a generally healthy person, you may feel like you don’t need it. In this section “Financially Savvy Female”we chat with Rachael Burns, CFP and founder of Meaningful financial planningon why all women, even those in good health, should consider getting disability insurance.
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What are some of the reasons why women might need disability insurance during their working years?
One in four women has a disability, so the likelihood of becoming disabled due to illness or injury is simply too high to ignore. For most people, a loss of income due to a disability would be financially devastating, and the impact can last a lifetime. Not only would they be unable to cover their living expenses, but they would also be unable to save for retirement. Single women are more at risk because they do not have a spouse’s income to fall back on.
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What are some common misconceptions women have about disability insurance?
- The chances of becoming disabled are low. One in four young people aged 20 today will be out of work for at least a year at some point in their career, due to disabling illness or injury.
- They would still be able to do their “office work” if they got hurt. People often forget that many disabilities are caused by disease, not injury. Even if your job is not physically demanding, you would still be unable to do it if you were seriously ill.
- A member of their family would take care of them. Even if they have someone to look after them, they will probably have to cover their own expenses. Moreover, it is unlikely that a family member will be able to provide round-the-clock care without jeopardizing their own finances.
- They will get disability benefits through social security. Social Security disability benefits are surprisingly hard to get, and they usually only pay between $800 and $1,800 a month.
- Their existing group coverage is sufficient. Some assume because they have a group policy through work that they are adequately covered. However, the basic policy might not be enough to cover their needs, depending on their situation.
How can women determine whether the coverage offered by an employer is sufficient?
They should obtain a copy of their policy and verify the following details:
- What percentage of their income is covered? Typically, disability insurance won’t cover more than two-thirds of your salary, so you need to consider whether that’s enough to cover your needs. Remember that in addition to covering your normal expenses, you may incur new costs due to your disability, such as hiring in-home care, remodeling your home to make it wheelchair accessible, etc.
- How long is the waiting period? The longer the waiting period before you can start receiving benefits, the more money you need to have set aside to cover your expenses in the meantime.
- How long is the benefit period? Some policies provide income regardless of the length of your disability, and some only cover a certain number of years. It’s important to have a plan for when your coverage ends if you have a permanent disability.
What else should women know about disability insurance?
A potential disability is one of the biggest threats to your financial future. It’s even more important for single women to have a disability plan because they don’t have a spouse’s income to fall back on.
GOBankingRates wants to empower women to take control of their finances. According to the latest statistics, women hold $72 billion in private wealth – but fewer women than men consider themselves to be in “good” or “excellent” financial shape. Women are less likely to invest and are more likely to have debt, and women are still paid less than men overall. Our “Financially Savvy Female” column will explore the reasons for these inequalities and provide solutions to change them. We believe financial equality starts with financial literacy, which is why we provide tools and guidance for women, by women, to take control of their money and help them live richer lives.
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