Like many people, you may try to stay healthy by exercising regularly, eating a good diet, and avoiding dangerous activities. But as we all know, life is unpredictable, and despite your best efforts, you may encounter an injury or illness that can keep you out of work for several months, or longer. If this were to happen, would you struggle to pay your bills? Or would you be forced to dip into investments designed to help you achieve long-term goals, such as a comfortable retirement?
To help prevent these outcomes, you may want to protect yourself from the possibility of disability. A good move is to create an emergency fund containing up to six months of living expenses, with the money kept in a liquid account. Even if you never need this fund for a disability, it’s not a wasted effort, because you could use the funds for other unexpected costs, such as a major repair to your home or car.
But to truly feel prepared for a disability that could threaten your financial situation, you may also need to consider disability insurance. If you work for a medium or large company, your employer may offer group coverage as an employee benefit. This coverage can be valuable, but it may not be enough. For one thing, many employer-sponsored disability policies won’t completely replace your lost earnings. Also, some group policies may make you wait longer than you’d like before your benefits start. And these policies aren’t always “portable” either: If you leave your job, you may also leave your disability plan.
For these reasons, you may want to consider purchasing a long-term disability insurance policy. However, the features of these policies vary widely, so you’ll want to be diligent in choosing the policy that’s right for you.
What are the key features to compare between policies? For starters, look at the type of policy: non-cancelable or guaranteed renewable? With a non-cancelable policy, terms and premiums cannot be changed, but a guaranteed renewable policy can increase premiums.
Here are some other features to consider:
Coverage amount – How much will you receive in benefits? You may be able to replace up to 100% of your after-tax income.
Waiting period – How long does it take from the start of disability to start receiving benefits?
Duration of benefit – How long will you receive benefits? To protect against long-term disability, you may want a policy that replaces income until your expected retirement age.
Inflation coverage – How much will your profits increase each year? Ideally, your benefits should keep pace with inflation and what you might receive from future raises or promotions.
Definition of disability – If you choose a ‘Self-Employment’ policy, you will receive benefits if you are unable to work at the job you had when you became disabled. With an “Any Occupation” policy, you’ll receive benefits if you can’t work at any job based on your qualifications.
Clearly, there is a lot to consider when choosing a disability policy. You may want to consult with a financial professional, who can help you choose a policy that fits your overall financial strategy. But don’t wait too long: You may never need to use this protection, but you might want to have it available.
Edward Jones is a licensed insurance producer in all states and Washington, DC through Edward D. Jones & Co., LP, and in California, New Mexico and Massachusetts through Edward Jones Insurance Agency of California , LLC; Edward Jones Insurance Agency of New Mexico, LLC; and Edward Jones Insurance Agency of Massachusetts, LLC California Insurance License OC24309
Jennifer Barrett (AAMS) is a local financial advisor at Edward Jones.
225-612-0413 | jennifer.barrett@edwardjones.com
Edward Jones. SIPC member.
Edward Jones, its employees and financial advisors are not estate planners and cannot provide tax or legal advice. You should consult your estate planning attorney or qualified tax advisor regarding your situation.
This article was written by Edward Jones for your local Edward Jones Financial Advisor.
