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Income protection: The value of disability insurance

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For many, keeping a paycheck is a top priority. We depend on our paychecks to fund all of the everyday things in our lives — our cars, our homes, our savings for retirement. A sudden loss or interruption of one’s income stream due to a disability could create serious financial problems, especially without sufficient assets on hand to help cover the shortfall. Without an income stream, individuals may be unable to pay for these basic expenses, including other types of insurance. In addition to coping with a new disabling injury or condition, these everyday living expenses will still need to be paid — even as income and retirement funding both stop.

And, while the general wisdom of establishing an emergency cash fund of at least six to 12 months income is still valid, not many Americans are able to set aside anywhere near this amount. In fact, a 2006 AC Nielsen Online Consumer Confidence Study revealed that “[n]early one-quarter (22%) of U.S. respondents said that once they have covered their basic living expenses, they have no money left over.”1 However, by 2009 that number had jumped significantly — now “50% of working Americans couldn’t make it a month before financial difficulties set in, and more than one in four would have problems immediately,” according to a LIFE Foundation survey.2

Without a way to continue mortgage or credit card payments, the financial blow from becoming disabled and losing one’s income, even for a period of a few months, can hit hard and quickly. In addition to the sudden inability to continue to fund retirement savings or pay one’s existing and ongoing expenses, a disability could involve sizeable new expenses: Escalation of medical bills and other unforeseen needs, such as required modifications to one’s home or car — all of which could prove costly. (“Choosing the perfect DI prospect“)

This is where the true value of disability insurance (DI) comes into play; it outweighs its cost more than with any other type of group insurance. By ensuring disabled insureds continue to receive an income, DI enables them to help make ends meet for as long as they remain disabled and unable to work. Also, voluntary group disability insurance provides an affordable option, so even lower-paid employees still can have access to quality coverage. (“Group vs. individual long-term DI plans“) Individual plans can be more expensive and difficult to obtain than group insurance plans; however, they can offer a valuable protection option for those who don’t have an option to purchase through an employer. (“Helping your clients’ employees answer “what if?“)

Losing one’s income can be devastating in any kind of economic climate. But when the loss of income is due to a disability, the financial consequences can be even more severe. The prospect of future employment can be diminished. The prospect of being unable to cover not only today’s critical expenses but even tomorrow’s retirement looms large. Without taking the necessary steps to protect one’s paycheck with disability insurance, both present and future financial security remains at risk. The true value of disability insurance is the income protection it offers, for today — and tomorrow.

Bob Risk is Vice President, Group Protection Sales with Lincoln Financial Group. Risk is responsible for the development and execution of the sales goals and strategies supporting Lincoln’s group insurance products. He oversees a team of Regional Vice Presidents of Sales and their sales teams, who are responsible for selling Group Protection’s suite of solutions including group life, dental and short- and long-term disability. He may be reached via [email protected].

1. ACNielsen Online Consumer Confidence Study, With Focus on Scraping By, American’s Forego Life’s Little Luxuries, September 2006.
2. The Disability Survey conducted by Kelton Research on behalf of the LIFE Foundation, April 2009.

For more information about Disability Insurance, check out these articles:
Top niche markets for DI
Disability insurance: Business funding needs
5 ‘gifts’ to get you started in DI


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