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?“)