Consumers Are Not Prepared for a Critical Illness.


Consumers Are Not Prepared for a Critical Illness

Ninety percent of middle-income Americans say they are not financially prepared for a critical illness diagnosis, according to a study by the Washington National Institute for Wellness Solutions. The study surveyed 1,001 Americans ages 30 to 66 with annual household incomes of $35,000 to $99,999. The following statistics reveal that many have little, if any, savings to fall back on in the event of a critical illness: • 75% have less than $20,000. • 50% have less than $2,000. • 25% have no savings.

To pay for out-of-pocket critical illness costs, middle-income Americans say they would need to use credit cards (28%) or loans from family/friends (23%) or financial institutions (19%). Another 23% don’t know what resources they could use to pay their expenses. Millennials and Gen Xers anticipate greater reliance on credit cards and loans to pay for critical illness expenses. Thirty-eight percent say they might never recover financially from a battle with cancer and 45% believe they would never recover financially from an Alzheimer’s/dementia diagnosis.

Eighty-eight percent of middle-income Americans have had no conversations with loved ones or advisers about potential care-giving options and 60% have not discussed financial planning for critical illness. Only 12% have explored care-giving options.

Why Americans Lack Disability Coverage but Need It.

Why Americans Lack Disability Coverage but Need It.
Nearly 30 percent of working American adults believe they are more likely to be targeted by the IRS for an audit than they are to experience an injury or illness resulting in loss of work. In reality, they have about a one percent chance of being audited, but they face about a 25 percent chance of losing work because of an illness or injury. Although the majority of adults consider their income as one of the most important things in their lives, a recent report from the Council for Disability Awareness showed that there are several factors preventing working adults from obtaining insurance to protect it.

Regardless of a person’s age, his or her ability to draw an income is the most valuable resource possessed. However, the report showed that more than 55 percent of adults said they did not have disability insurance. This is an important insurance product for every working American to have, and it protects against the loss of income if the policyholder is unable to work for months or years following an injury or illness. When asked why they did not have this vital form of coverage, nearly 35 percent of adults said they could not afford it. Another 30 percent said they had never considered it, and nearly 25 percent said they did not know enough about it.

While people cited being unable to afford coverage as a reason not to have it, they should actually see it as something they cannot afford to go without. On average, a long-term disability lasts more than two years. This leaves helpless workers to try to find ways to compensate for lost income and pay living expenses. Government disability benefits alone will not even come close to replacing prior income. More than 40 percent of respondents said they would purchase disability coverage if it were cheaper, but about 60 percent said they had less than six months of income saved.

About 25 percent of today’s adults who are 20 years old will face a disability before they reach retirement age. Adults underestimate the risk they face of losing their ability to work. Although accidents are what most people think cause disabilities, the main causes are actually depression, back pain and absence requests for cancer treatment. About 50 percent of respondents said they would have to drain their savings if they faced a disability. Younger respondents said they would ask family or friends for loans, but older respondents said they would seek government programs. However, both solutions are only temporary and would not suffice for a long period of time.

It is important to consider how the bills would be paid in the event of a disability lasting more than three months, and people should consider how long they would be able to cover their expenses. Couples should also consider whether they could survive on one partner’s paycheck if the other became ill or was injured. Anyone who cannot answer these questions quickly with a viable solution should seek professional advice.

People who have disability insurance options offered by an employer may find more affordable solutions in their benefits package than they would by searching independently. There are more types of coverage than just disability alone in the marketplace, so all options are worth considering. Some companies may offer more than others, but employees who do not have access to this type of coverage at work should still seek it independently. To learn what options are available, discuss concerns with an agent.

You May Need Disability Insurance.

Needing disability insurance at some point in your lifetime is not as far-fetched a possibility as you may think. Disability doesn’t have to involve a career-ending catastrophe — it could simply involve a bad accident from which you need several months to recover. If you do find yourself out of work for a relatively short or long period of time, you may find yourself wishing you’d lined up sufficient disability insurance.

Take a gander at the table below. It shows how likely you are to become disabled for various periods of time before you reach age 65, depending on your current age:

Age Today For Six Months For One Year For Two Years For Five Years
25 35% 22% 17% 13%
30 33% 21% 16% 13%
35 31% 20% 16% 13%
40 28% 18% 15% 12%
45 25% 17% 14% 11%
50 14% 12% 17% 10%

Source: 1985 Commissioner’s Disability Income Table

As you can see, even if you’re 40, the odds are nearly 1 in 5 that you’ll be disabled for an entire year. The higher odds for younger people might surprise you, too. (Remember that childbirth and recovery can be considered medical disabilities for women that can last six months or more.) Disability insurance is a dangerous thing to ignore.

The Need For Income Protection.

This two-minute video shows the importance of income protection.  It discusses what one’s income provides, the real-life risks we face and how people can protect their incomes against the chances of being too sick or hurt to work.

Protect Your Paycheck.

You protect your car and your home with insurance, but are you protecting an asset that is more valuable than either of those—your paycheck? Tom goes a little over the top with his protection methods, but has made the right choice to protect his paycheck properly.

Protect Your Power to Earn Through Disability Insurance.

Protect Your Power to Earn Through Disability Insurance

If you’re one of the millions of Americans living paycheck-to-paycheck, and most of us are, an accident or illness that leaves you unexpectedly unable to work can leave you unable to pay for your living expenses and result in financial devastation. For this reason alone, disability insurance is a very important insurance coverage. Unfortunately, far too many people don’t have enough, if any, disability coverage t protect them from the above.

Cost is one commonly cited reason for the lack of disability coverage. This is especially true for those employed in a high-risk occupation. Other factors impacting rates include the benefits selected, age, and personal health history. However, considering the protection provided by disability insurance, a premium amounting to 3% or less of your income is a relatively small investment. You might have many other tangible areas to spend that 1-3% of your income now, but how would you financially survive should you become unable to work in the future?

Most experts agree that adequate coverage starts with a policy providing a minimum of 60% of your gross income during the time you’re disabled. The reasoning being is disability insurance premiums are typically paid using post-tax dollars, meaning the benefits are tax-free. So, a policy that provides 60% of your pre-tax income would amount to your existing paycheck.

The waiting period of a policy is a major factor when it comes to policy rates. Premiums are usually significantly lower if you can afford to wait 90 days after becoming disabled to begin collecting benefits. Do keep in mind that this delay means you’ll need personal savings to cover your expenses while waiting for the benefits to start. The maximum benefit period is another major factor affecting the policy rate. Purchasing a policy that only offers benefits until you’re 65-years-old can lower the rate, but you should expect to have sufficient retirement income to provide coverage at the end of the maximum benefit period.

When looking at disability policies, you should pay close attention to how the policy defines disability. Some policies are designed to only pay in the event of a total disability and inability to work any job. Partial disability protection is an important feature, as it’s designed to pay the lost percentage of your income in the event that you’re only able to work part-time during your disability.

You should further determine if the policy is guaranteed renewable and non-cancelable. With these features, the policy can’t be canceled and the premium can’t be raised should your health change during the course of the coverage. It’s important to make sure the policy has an inflation rider that provides a cost of living adjustment for the disability period. A future insurability rider is another option to consider. This feature will permit you to buy additional coverage (regardless of any occupational, activity, or health-status change) should your income increase. Some carriers may also have an option for transition benefits that will pay a portion of any income loss you might incur when returning to work after a period of disability.

Individual Health Insurance

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