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What about the need for
insurance in the event of disability? This is a good question. And, all too often, it's
one that people don't consider until it's too late. Very few of us would go without fire
insurance. Yet, most people never even think of buying disability insurance.
Unfortunately, one in seven workers will be disabled for a period of five or more years
before they reach age 65. Far fewer people will suffer a house fire.
A common misconception for many is that they're already covered in case of disability. But
many employer-sponsored plans will only pay for a short period of time or a smaller amount
than your wages.
Social Security offers two programs that can help if you're disabled: Social Security
Disability Insurance (SSDI) and Supplemental Security Income (SSI). SSDI will pay up to a
maximum of 80% of your pre-disability income. The best way to estimate what Social
Security would pay is to contact them and request a Personal Earnings and Benefit Estimate
Statement (1-800-772-1213). Although it takes a little effort, it's the only good way to
get an accurate benefit amount.
Counting on Social Security alone is risky. According to The Social Security Forum, more
than half of first-time applicants are rejected by Social Security. And, it can take up to
a year for them to decide whether to pay you SSDI.
So even if you do have some coverage, having enough cash to pay your bills until the
insurance kicks in could be a problem. You'll not only want to consider how much income
you'd be getting, but when you'd receive it and for how long.
The amount of insurance that's advisable is different for everyone. It's not as simple as
taking what you currently earn and using that figure. Your expenses can also change
dramatically. So you'll need to estimate changes to both income and expenses.
You will spend less on some things. After all, if you're not working you won't need work
clothes. Lunches at home are cheaper than lunches out. And it might be possible to get rid
of that second car. Every case is different. But, new expenses can more than eat up any
savings. While some disabled persons are able to care for themselves, others require
in-home nursing care or even a move to a nursing home. It's not unusual for nursing homes
to charge $50,000 per year for a patient. The healthy partner, if there is one, could be
too busy working to complete all the household chores so non-medical help could be
required, too.
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