Eight Things You Should Know In Case You Get Sick or Injured

Shielding loved ones from financial stress is about doing your best to try and ensure that they're provided for, even when something unexpected happens to you. Lost income, treatment costs, and recovery time can have a severe impact on your finances – with many expenses falling outside standard medical insurance or Social Security Disability insurance payments. On the bright side, forms of coverage are available that can help provide protection for you and your family.

There are a few things you should look into while figuring out the types of insurance you might need:

1. First, determine the real cost of protecting your income.
Income is a critical component of your standard of living, and that tends to apply to everyone – single or married, family or not. Add up mortgage payments, student loans, credit card debt, and other costs of living, as well as putting money aside for college fees and retirement, and chances are good that you need most of your paycheck each month. Disability income insurance should be thought of not just as protection for missing wages during a temporary illness or injury, but over a whole lifetime. Moreover, those with higher incomes often live with corresponding financial obligations. Most disability income insurance won't cover all of your lost income if you're unable to work due to illness or injury, but it can provide enough income to cover a large portion of those expenses. In general, individual disability income insurance costs between 2 percent and 3 percent of your salary. That means, if you earn $100,000, you'll spend around $2,000 to $3,000 a year for coverage.

2. Understand the terms of coverage.
There are short-term disabilities and long-term disabilities, and benefits plans can vary widely when it comes to the terms. Knowing what you have is important if you want to guard against gaps.

Short-term disability is generally defined by employers as falling within 70-180 days, and is often employer-paid. Long-term disability will kick in after that short-term coverage has expired. Long-term disability coverage might extend for years or even until you're 65, depending upon the employer's offering.

3. Is Social Security Disability Insurance enough protection?
Social Security Disability Insurance is provided by the federal government and meant for individuals who suffer disabilities that prevent them from working for at least one year. If you qualify for Social Security, you may qualify for disability payments, depending on the degree of proven incapacity. The income provided through Social Security Disability Insurance protection currently averages about $12,600 a year¹, and receiving the benefits could take months, so be sure you can live on this amount of money if you choose to rely on this option alone.

4. Evaluate the coverage you already have.
Become familiar early on with the details of existing insurance coverage, starting with those offered through your job and evaluate if it is sufficient. About a third of U.S. employees currently have access to disability income insurance through work.² Take time to research the terms of this coverage if you have it, as terms can vary. One critical detail about disability income insurance (which would include the benefits you get through your employer) is that it has to be obtained prior to the accident or illness. If you're self-employed, you may also be able to benefit from plans that you can obtain from memberships in professional organizations.

5. Consider strengthening your protection, even if you're in a plan.
If you're offered disability income insurance through your employer, you may want to take maximum advantage of it. Base coverage is often partially paid for by employers, and in some cases, may be fully funded by them. As a rule, you would be reimbursed around 40-60 percent of your salary. Basic disability income insurance often has income caps and may not include bonuses, commissions, or profit sharing. Look at a supplemental disability income insurance plan, either through work or independently, to cover income that basic insurance may not. Another thing to consider are the tax implications of the offers provided by your employer. Be aware that the benefit may be taxable income. If your employer pays the premium, then benefits are taxed. Otherwise, you may have the option to pay premiums with pre- (benefits will be taxed) or post-tax (benefits will not be taxed) dollars.

6. Talk to your financial representative about a "waiver of premium" rider and retirement plan contributions.
To ease the financial strain resulting from a disability, some disability and life insurance policies allow you to purchase a waiver of premium rider. Riders are available at an additional cost. This protects you in the event of an unexpected disability that makes it hard for you to pay your monthly premiums. Without it, if you couldn't afford to pay your premiums, your coverage would be cancelled. In addition, some disability plans may include 401(K) and other deferred compensation plans in their earning definitions or include riders that can help you keep up contributions to retirement plans while disabled. Check with your financial representative for the specific guidelines your policy has; there may be certain requirements in terms of your age and how a disability is defined.

7. Look into accident, cancer, and critical illness insurance.
Products are available that can help to protect your family finances when illnesses and accidents disrupt life and add unanticipated costs. These policies may be offered through your work, outside professional organizations, or from private insurance companies. The terms differ from conventional medical insurance in that payments are often made directly to you instead of to the medical providers. Deductibles, co-pays, extra tests, transportation to hospitals, and even cost of living expenses such as childcare, rent, and food are covered, and indeed, you may be able to use the payments in any way that you want.

8. Check your coverage options before leaving a job.
Even after you're clear about your insurance plans at work, and have taken out any optional and supplemental forms of coverage, be careful about the actions you take if you're considering filing a claim. Most employer-offered insurance requires you to be an active employee. Some insurance may allow you full portability. It's extremely important to know your position when it comes to extending coverage, particularly if you have filed a claim or aren't sure when you'll be in a full-time role again.

With the right protection, life's challenges can be overcome.

Disability, accident, cancer, critical illness, or business insurance policies have all been designed with one goal: to prepare you and your loved ones for potential health difficulties that can arise, and the financial consequences. Many of the costs and lost income these policies cover may not be picked up by standard health plans or by basic disability.

Hopefully, you'll never need to make a disability claim. When in doubt about your coverage, speak to a financial professional who understands insurance. You'll feel much more secure knowing that you've thought about the possibilities ahead of time and created a plan that doesn't depend upon good luck.

Phyllis Falotico is Assistant Vice President, Group Marketing, for The Guardian Life Insurance Company of America. She has more than 20 years of marketing experience and is a voice in the financial industry when it comes to emerging trends, marketing strategy, and the development of promotions and communications. She has taken an innovative and transformational approach to segment, content, and digital marketing that drives awareness, enhances engagement, and expands revenue-generating opportunities for financial products. With a focus on Group Insurance, Phyllis creates programs that connect with working Americans and the rethinking of responsibilities in today’s employee benefits marketplace.

References
1, 2 Kimberly Palmer, "Why You Probably Need More Disability Insurance," U.S. News & World Report, Oct. 9, 2013

Posted on May 26, 2016