A Primer On Long-Term Disability Planning

Young woman in wheelchair working with a male colleague

Disability can happen to anyone. It can strike as an unwelcome visitor when you least expect it.  It is especially serious for those who are breadwinners, because long-term disability effectively snuffs out the earning power of their human capital.

Many people are totally unprepared for disabilities and the financial consequences that can arise. Indeed, certain groups of workers, independent contractors for example, can be especially prone to damaging financial conditions if disabled.

Long-Term Disability: The Facts

The U.S. Social Security Administration estimates that a 20-year-old person has a 26.8% chance of becoming disabled before he or she reaches the age of 67. That’s just over one in four of us. According to the Council for Disability Awareness, if a person should become disabled, the average long-term absence from work is 34.6 months, or almost three years.

Accidents are commonly assumed to be a major cause of disability cases, but in fact, they account for fewer than 10% of cases. Arthritis and other musculoskeletal problems account for a third of all disability cases. Heart disease, cancer and mental health problems are also common conditions that cause people to miss work.

How To Mitigate The Risk Of Long-Term Disability

There are two principal methods of mitigating the risk of long-term disability: Actions you can take to prevent it and having insurance to cover your loss if you become disabled.

  • What You Can Do. You can reduce your odds of becoming disabled by making a few basic improvements in the way you live. These include driving prudently, not drinking to excess, avoiding unsafe situations, and being aware of our surroundings and activities.
  • Disability Insurance. Of course, even with the best foresight, situations can arise where one becomes disabled. If this occurs, long-term disability coverage can provide for the loss of income incurred as a result of disability. Do you have 34.6 month of living expenses saved for such an occurrence? If so, you can choose to be self-insured. Most Americans are not in a position to self-insure in the case of a disability. For most of us, disability insurance is a key part of a personal financial plan. Unfortunately, about 110 million Americans do not carry long-term disability insurance, according to ProtectYourIncome.

Obtaining Disability Insurance

Obtaining Disability Insurance

Individuals can procure disability insurance through a group insurance plan provided by their employer or by purchasing it as an individual policy. Generally, group policy insurance is part of a total compensation package offered by some companies, typically large, well-established firms, in order to attract and keep quality employees.

Other companies do not offer disability coverage to their employees. Most independent contractors, entrepreneurs and other self-employed individuals buy disability policies privately.

Real estate agents are a group of people who may have a particular need for disability coverage. This is because most agents operate as independent contractors, working out of the offices of a real estate agency, but often not receiving salary and benefits.

Basics Of A Long-Term Disability Plan

The online site NerdWallet gives an excellent overview of disability insurance. In short, disability insurance pays a portion of your income because of an injury or illness. There are two main types: Short-term and long-term. Short-term, typically replacing 60 to 70% of income, can provide covered payments for up to one year. Long-term disability insurance generally replaces 40 to 60% of income. Its benefits end when the disability ends. Different insurance policies define “disability” in different ways, so it pays to read the details of any given plan. If you buy your own, the annual price for a long-term disability insurance policy generally ranges from 1% to 3% of your annual income.

Rosenbaum Financial and the 1099 Advantage Plan

Real estate professionals can obtain group disability insurance through Rosenbaum Financial. This is a much more affordable option compared to individual insurance policies. Our 1099 Advantage Plan, created specifically for the real estate industry, provides needed coverage for many who up to this point were unable to insure against disability losses

The 1099 Advantage plan offers long and short term disability insurance, life insurance, accident and supplemental health insurance. This plan is completely customizable. Rosenbaum Financial will design a set of benefits that specifically fills the needs of your brokerage and those who work there.

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