Disability insurance is one of the most important segments of the working person’s financial/insurance plan, and adequate amounts of disability insurance are essential for the well-being of people. But it is often overlooked because most people do not perceive they will ever lose their income due to disability. However, loss of income due to disability is a fact of life and is a greater peril than death occurring during a working career.
Our federal and state governments have long recognized the necessity for people to have a continuing flow of income. Many programs such as Social Security, unemployment compensation and individual retirement accounts are in place to help our citizens with their income cash flow, and there are a few states with disability plans. However, government disability plans alone do not provide the necessary income to support a reasonable lifestyle for most people.
Most people are required to buy insurance to cover their automobiles in the event of accident or loss, and many people choose to buy homeowners insurance and medical plans. Most arrange insurance for their boats, artwork, jewelry and other prized possessions, or to insure other peoples’ misfortune with liability insurance.
But the main thing that has created these assets and is likely to be inadequately insured is our income. The need for a continuing income cash flow has long been recognized by economists and scholars of finance. As long ago as 1913, Solomon S. Huebner, Ph.D., professor of economics at the Wharton School of Finance, University of Pennsylvania, stated that disability insurance should be part of the life group of coverages to replace income when the earner is unable to produce it. A vanishing business
A vanishing business
The disability insurance industry, due to neglect and lackluster leadership, has been on a slide toward total disappearance. From a high of 545 individual disability insurers in 1975, the count slipped to 320 in 1980 and to a mere 26 in 2002. Disability insurance was virtually forgotten from 1993 forward when the last disability insurance training course was held. The number of life insurance companies underwriting disability insurance has dwindled to a hardy few.
It is timely for all advisors and planners to support the efforts being made to reinvigorate this segment of the insurance industry. America must have a facility to guarantee replacement of an adequate income cash flow, and to cover business obligations in the event of a disabling injury or sickness.