By Boyce F. Lowery, CLU, ChFC
Do you have homeowners insurance? I’m willing to bet that you do. First of all, most mortgage lenders require it. But even without a mortgage, most people insure their homes. Your house is worth a lot of money and means a lot to you, so you want to protect it.
In 2015, US fire departments responded to about 365,500 home structure fires. That fact alone is probably enough to encourage one to purchase homeowners insurance, but did you know that those fires caused about $7 billion in damage? (1) That comes out to a little over $19,000 per fire. Between 2010 and 2014, roughly one in every 338 households reported a fire per year.
You likely would consider it foolish not to insure your home when assessing your risks, right? Yet, while we are all so careful protecting our homes from financial loss, there is another area representing at least as large of a financial loss that we completely ignore. If the investment in your home is too much to risk, what about an even more valuable asset?
Think about the amount of money that would be lost between now and your retirement if you were to become disabled due to an illness or accident. For many people, this amounts to hundreds of thousands or even millions of dollars of earning power. With no income protection, your current lifestyle would very likely be destroyed.
Your Chances Of Becoming Disabled
The following statistics come from the Council for Disability Awareness Personal Disability Quotient disability risk calculator:
- A typical female, age 35, 5’4″, 125 pounds, non-smoker, who works mostly an office job, with some outdoor physical responsibilities, and who leads a healthy lifestyle has the following risks:
- A 24% chance of becoming disabled for 3 months or longer during her working career;
- with a 38% chance that the disability would last 5 years or longer,
- and with the average disability for someone like her lasting 82 months.
- If this same person used tobacco and weighed 160 pounds, the risk would increase to a 41% chance of becoming disabled for 3 months or longer.
- A 24% chance of becoming disabled for 3 months or longer during her working career;
- A typical male, age 35, 5’10″, 170 pounds, non-smoker, who works an office job, with some outdoor physical responsibilities, and who leads a healthy lifestyle has the following risks:
- A 21% chance of becoming disabled for 3 months or longer during his working career;
- with a 38% chance that the disability would last 5 years or longer,
- and with the average disability for someone like him lasting 82 months.
- If this same person used tobacco and weighed 210 pounds, the risk would increase to a 45% chance of becoming disabled for 3 months or longer.
- A 21% chance of becoming disabled for 3 months or longer during his working career;
Various factors can also increase or decrease your risk of disability. Risk increases due to: excess body weight, tobacco use, high risk activities or behaviors, chronic conditions such as; diabetes, high blood pressure, back pain, anxiety or depression, frequent alcohol consumption or substance abuse. Risk decreases due to: maintaining a healthy body weight, no tobacco use, healthy diet and sleep habits, regular exercise, moderate to no alcohol consumption, avoidance of high risk behaviors including substance abuse, maintaining a healthy stress level, and effective treatment of chronic health conditions. (2)
The Consequences Of Long-Term Disability
If you are out of work due to a disability for 82 months, that would be $1,025,000 in lost wages if your annual salary is $150,000. Social Security disability payments are very difficult to obtain and typically will take multiple appeals if you are ever to be successful. Even if successful, the average in 2017 was only $1,171 a month, with a maximum of $2,687. (3)
The average payment from Social Security Disability payments would only provide you with a total in benefits of $96,022 over the course of 82 months, which is not even 10% of your lost salary. Even if you received the maximum allowed payment from Social Security Disability benefits that would only be $220,334, or about one-fifth of your regular salary.
Do you think you could pay your mortgage and maintain your normal lifestyle with only $1,171 a month? In all likelihood, you would also have new medical bills to pay on top of your regular expenses. If Social Security cannot even cover your mortgage, what will you do with those medical bills?
Sadly, many people are forced to file bankruptcy following a long-term disability. Medical problems contributed to 62% of all bankruptcies that were filed in 2007, a 50% increase over 2001. Also, medical problems contributed to half of all foreclosures in 2006. (4) Even with homeowners insurance, you can still lose your home to disability.
Protecting Against Long-Term Disability
Not protecting yourself against the financial hardships associated with long-term disability is like playing with fire. Worse, disability could cost you much more than having a home fire. The very basics of risk management would include protecting what is likely your most valuable financial asset – your earning ability. You need long-term disability insurance.
There are a variety of insurance products available to protect your income from disability. The cost and details will vary based on the coverage amount you want, benefit period, waiting period before benefits kick in, your age, health, location, and occupation, and whether or not you want it to be non-cancelable and specific to your own occupation. Because of the variety of options available, it is important to work with a disability income insurance specialist to ensure that you purchase the policy that best fits your unique needs.
If you are one of the 100 million workers who does not have private disability income insurance, call us today at 888-827-0146. We can set up a free and confidential consultation where we will discuss your needs and the kind of disability insurance policy that will best meet them. Not insuring your income is like playing with fire. Don’t get burned; call us today.
About Boyce
Boyce Lowery is a 40-year veteran and established expert in the insurance industry. As the managing partner of Suncrest Advisors, he, his partner, and their associates all aim to provide financial security and peace of mind to business owners, executives and professionals, and high net worth individuals across the United States. Along with more than four decades of experience, Boyce is a Chartered Life Underwriter® (the premier designation for insurance professionals signifying specialized knowledge in life insurance and estate planning) and a Chartered Financial Consultant® (known as the advanced financial planning designation). To learn more, visit http://suncrestadvisors.com/ or connect with Boyce on LinkedIn.
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(1) https://www.nfpa.org/Public-Education/Campaigns/Fire-Prevention-Week/Fast-facts-about-fire
(2) http://www.disabilitycanhappen.org/chances_disability/disability_stats.asp
(4) http://www.disabilitycanhappen.org/chances_disability/disability_stats.asp
(5) http://www.disabilitycanhappen.org/chances_disability/disability_stats.asp