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4 Common Myths About Disability Income Insurance
September 26, 2016 | Amy Merrick; excerpted from Thrivent magazine
Don't let these misconceptions keep you from understanding the value & importance of disability income insurance
Most of us get the need for health insurance, homeowners insurance and car insurance. But how many of us know about – or understand – disability income insurance? Why is it so important?
Plain and simple: Disability income insurance replaces a portion of your income if you're unable to work. Depending on the contract, you could receive income for a few years, or even decades.
Separating fact from fiction
Here are four common myths about disability income insurance.
1. "I don't need it because I'm healthy."
It can be hard to think about being unable to work when you're in good health.
"When people think of disability income insurance, they imagine someone who is paralyzed, in a wheelchair or has some other catastrophic event – something that you don't believe is going to happen to you," says Andrew Mortenson, a Thrivent Financial representative in West Bend, Wisconsin. "I've had members file claims for injuries from falling down stairs or slipping on ice."
It doesn't have to be something severe.
2. "I have plenty of insurance through work."
Your employer may provide you with some disability income insurance. That convinces some people they don't need to buy their own contract, which can actually wrap around the insurance they have from their employer.
While a contract provided by your employer sounds good, the benefits it pays could be taxed, the same way your paycheck is. If you can't work, you could take home less income than you're expecting.
Also, sometimes people think workers' compensation will cover an injury or illness.
"What happens if you don't get injured at work but at home?" asks Eric Werlinger, a Thrivent Financial partner in Golden Valley, Minnesota.
Workers' compensation probably won't cover those situations, but disability income insurance could.
3. "I'll use my savings – or I'll qualify for Social Security."
People often tell Werlinger that if they get injured, they'll sign up for Social Security. But it may be difficult to qualify for.
The Social Security Administration often denies many applications at first. It could take up to two or three years to complete the appeals process. Disability income insurance can help your family remain financially stable while you wait to qualify for it.
People also often think they'll use their savings until they can go back to work.
"Unfortunately, your expenses may increase due to the disability and medical bills," Werlinger says.
A person might need to pay for physical therapy or home modifications to make it easier to get around.
4. "I can't afford it."
You probably can afford some coverage, Mortenson says. "For younger people, it can be reasonably priced."
New contracts guarantee keeping premiums level, which means young and healthy people can lock in a low rate.
Another option is to buy disability income insurance that covers being out of work for, say, two years, rather than a contract that would bridge the gap all the way to retirement.
"It's actually fairly affordable," Werlinger says.
Some contracts cost as little as $25 to $30 a month. More importantly, it helps protect the income that you and your family need.
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