The Benefits and Drawbacks of Long-Term Disability Insurance
Most people prefer long-term disability because it reduces the risk of financial hardship in case of disability. If you do not have coverage, you may find it difficult to pay bills, support your family, and save for retirement. Consider how your family would be affected if you were unable to earn a living.
Let’s look at some of the benefits and drawbacks of long-term disability insurance:
Shield your most valuable asset- your ability to earn your living expense. People purchase insurance to protect their home, car, health, and family. It is critical to save your income. If you earn $100,000 per year and are unable to work for four years, you will most likely suffer financial consequences.
Protect your family- If you’re disabled in case of an incident it can provide significant protection so that your spouse isn’t forced to take on a second or different job or pressurize to bear the living expenses.
If you pay for your policy with after-tax dollars, your benefits are tax-free. If you have an individual disability policy that you pay for with after-tax dollars, your benefits will be tax-free. However, if you have a group disability policy through your employer, you will almost certainly have to pay taxes on it because you either
a) Pay premiums with pre-tax dollars or
b) Your employer has to pays for all or part of the premium overall
You are free to spend your benefits however you see fit- Benefits are paid in cash and do not require reimbursement, so you can spend it however you see fit.
Assists you in meeting your ongoing financial obligations- If you are unable to work and have no income, your debts and financial obligations do not disappear.
You’ll need to continue paying for your house, car, loans, and living expenses, as well as continue contributing to your retirement account.
Aids in avoiding bankruptcy and debt- A disability can quickly deplete your savings and even put you in debt. If you receive income from your policy, you can avoid depleting your savings and using high-interest credit cards.
Allows you to concentrate on healing- It can be extremely stressful if you are disabled and do not receive income. Anxiety about money can make it much more difficult to recover and return to work.
Peaceful- Knowing you and your family are adequately protected in the incident you are unable to work due to an accident, illness, or injury will provide you with general peace of mind, as you will not have to worry about the basic expenses.
Disability insurance can be costly- Coverage becomes more expensive as you get older. A policy will typically cost between 1-3% of your annual income. Your age, gender, job, health, benefit period, benefit amount, elimination period, disability definition, and riders all play a role. Women will pay higher premiums than men because they are more likely to file a claim. In general, the younger and healthier you are, the cheaper it will be.
Policies may include exclusions that exclude coverage for pre-existing conditions- If you have a pre-existing condition, such as back pain, your disability policy is likely to exclude or limit coverage for that condition. If the insurance company provides coverage with an exclusion, they will insure you but will not cover that specific condition, body part, or disabilities caused by certain activities. Some exclusions are permanent, whereas others may be reviewed at a later date.
Waiting time- Policies include an elimination or waiting period. You will not receive disability benefits during this time and will have to rely on your savings to pay your bills.
Waiting times can be set between 30 and 730 days. A shorter elimination period will increase your premiums, while a longer elimination period will decrease your premiums.
You will not receive benefits if you never have a disability- You won’t receive benefits from the insurance company if you never have a disability, but you did pay for coverage for a set number of years. However, the coverage did its job and provided you with adequate protection. Consider yourself fortunate that you did not suffer from a disability.
When purchasing long-term disability insurance, there are pros and cons to consider, but the pros usually outweigh the cons. So, contact with Houston’s Social Security Disability Lawyer to pursue your specific case precisely.