The Real Cost of Being Uninsured.

Life insurance, disability insurance, long-term care insurance—if you are like most people, when your insurance agent starts talking about coverage you ought to consider, all you can think about is what it’s going to cost you.  And even though it may seem like the economy is getting better, many people are still struggling with the impact the recession has had on their budget and what expenses they can put off until tomorrow.

According to the 2013 Insurance Barometer Study, conducted by LIFE and LIMRA the majority of consumers are concerned about having enough money for a comfortable retirement, with paying for long-term care and medical expenses next in line in terms of worries—all legitimate issues.

At the same time, it can be challenging to find the money to insure against a possible future event such as a major illness or debilitating accident when you’re facing real expenses or dealing with an insufficient income right now. In situations like that, it can be tempting to metaphorically cross your fingers and hope for the best, putting insurance on the “deal with it later” list. But before you choose that option, you need to know the real cost of being uninsured.

Life Insurance
Imagine that you were to die today. Would your family be able to pay your final expenses and continue to meet ongoing living expenses without your income? Or, if you are a stay-at-home parent, would your partner be able to afford to pay someone to perform all the duties and responsibilities you handled? What about long-term plans—will your children be able to attend college or your spouse retire as planned? With adequate life insurance, your family will be provided for when you are no longer there.

And, depending on the type of policy you choose and the option added to the plan, your insurance can be increasing in value or even, in the case of a terminal illness, provide funds to pay bills even before you die, relieving you and your family of at least one major worry.

Worried about the cost of insurance? While the vast majority of underinsured middle-income consumers include cost as one of the reasons for not purchasing life insurance, even when they believe they need it, the reality is that most people grossly overestimate how much a policy premium would be. For example, a 20-year, $250,000 level-term life policy for a healthy 30-year-old has an actual yearly premium cost of $150. Those surveyed estimated the same coverage at $350 to $500.

Disability Insurance
You don’t need disability insurance, you think. After all, isn’t that what Worker’s Compensation is for? Yes — and no. If the injury occurs on the job, then Worker’s Comp does come into play. However, only 5% of disability claims are work-related—and, according to the Council for Disability Awareness, approximately 90% of disabilities are caused by illnesses rather than accidents.

For example, if you are diagnosed with cancer or sustain major injuries in an auto accident and are unable to work, what will be the source of your income? How will you cover your living expenses and the additional cost of medical care? In this scenario, half of working Americans couldn’t make it one month before experiencing financial difficulties and nearly one fourth wouldn’t make it a week, according to a LIFE study. With disability insurance, however, you would have a source of replacement income to cover costs until you’re able to return to work. Fortunately, there are several options for getting disability insurance coverage.

Long-Term Care Insurance
We’d like to think that we will be able to live life on our own terms until it’s time to go, but the reality is that two-thirds of people will actually need some type of long-term care, either in their homes or at a facility. Where will the money come from if you fall into that majority? From Medicare or your existing health insurance? Not likely, since health insurance only pays for doctor and hospital bills, Medicare covers only short-term skilled nursing home care, and Medicaid only comes into play if your assets are very limited.
Will your savings be able to cover the expense? A home health aide three days a week will cost more than $20,000 a year and full-time nursing home care can be over $78,000 annually.

Maybe you think long-term care is something only the elderly have to worry about. But anyone at any age can suffer from an accident or debilitating injury that requires long-term care. As a matter of fact, 40 percent of patients receiving long-term care are under age 65.

For a comprehensive look at what long-term care insurance  contact your agent who specializes in long-term care insurance.

The Bottom Line
There are a lot of factors to weigh when purchasing insurance, but be certain to have all the facts before making a decision. As you can see, both buying insurance and not buying insurance comes at a price. Be sure you know what the cost is—short-term and long-term.

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.

Is Your Business Aware of Disability?

Is Your Business Aware of Disability?

I recently received an email that May is national Disability Insurance Awareness Month. My initial reaction was, “What, people don’t know they can become disabled?”  We’ve all seen situations where an unexpected disability disrupted or even destroyed a family or business. Upon further reflection, I realized the issue is “insurance.” Many people don’t understand the kinds of disability insurance that are available.  Let’s help out the cause by providing awareness of various disability protection options that businesses might consider.

1 – Disability Income.  Many employers are aware of this form of disability coverage. If you become disabled, after a waiting period, the insurer pays a monthly income for a period of time or until the disability ceases. Companies can buy it for a group of employees (Long-Term Disability “LTD”) or for individuals (Individual Disability Income “IDI”) like themselves or key employees.  At the risk of sounding overly simplistic, if you make a high wage and are insurable, the question is not, “Can I afford it?” Rather, the question is, “Can I afford NOT to have it?”

2- Overhead Expense Protection.  Smaller, privately-held companies often avail themselves of this coverage. The idea is that if the owner, who is typically the key employee, becomes disabled, the business needs to continue paying fixed expenses such as rent and salaries. As the name implies, with this coverage the insurer pays a defined amount to the company to defray overhead expenses until the owner returns to work. I think of this as “optimism insurance” with the purpose of keeping the company’s doors open while the owner recuperates from a disability.

3 – Disability Buy-Out.  Much like Overhead Expense Protection, this coverage is more about the business than the individual. With this option an amount, typically a lump sum, is paid by the insurer if a stockholder becomes totally disabled and consequently triggers a stock buyout.  Perhaps because of high profile disabilities in the news, it seems like this coverage is getting more attention – and should.  A lot of buy-sell agreements I see either ignore disability, or have it as a triggering event, but without funding. Disability buy-out can provide the cash (typically on a reimbursement basis) when it is most needed.  Just be sure to coordinate this coverage with the terms of the buy-sell agreement.

These are the “Big 3” in disability coverage for businesses.  One replaces income, one defrays overhead and the other helps fund an ownership transfer.  With this being the month for “disability insurance awareness,” I want to point out two other coverage options that are not as well known.

  • Business Loan Protection – In an environment when business borrowing is both more difficult and more important, this protection may be crucial.  This type of coverage helps ensure lending institutions get paid even when an owner becomes disabled and can’t bring in revenue to cover his/her business-related loan obligations. So, if you become totally disabled and have this insurance, you essentially transfer your loan obligation to the insurance carrier.    I’ve seen this offered as a rider to an Overhead Expense Protection policy; that makes sense to me, considering that often debt service is one of the top forms of overhead for a business.
  • Key Person protection – When a key employee can no longer work because of a disability, it leaves a serious gap for the business owner and business profits can take a hit. Key person protection provides a benefit for owners to use at their discretion to fill the gap – whether that means spending the benefit to offset recruitment costs or simply replacing lost revenue.  It’s become common place for companies to protect themselves with key person life insurance.  It’s time to cover the contingency of a “living death”.

Most don’t realize – an individual is 240 times more likely to incur a disabling injury than suffer a fatal injury. It’s important for businesses and their employees to be aware of the “what if” and consider if a disability insurance policy is right for them. My intent is not to evoke pictures of hospitals, rehab centers and nursing homes. I’m suggesting, rather, images of continuing income for families, companies surviving a rough patch while the owner is gone, and successful transfers of business interests.  It’s something we don’t want to think about happening, but better to be prepared than not. Think about it. Be aware of it.   

Disability Income – Who Will Help With Bills If You Get Disabled?

When You Can’t Work, Disability Insurance Goes to Work for You

But what would happen if you become disabled or ill and could not work?


How would you…

  • Pay your bills?
  • Make your monthly rent or mortgage loan payments?
  • Buy your groceries?
  • Make your car payments?
  • Provide for your children’s education?
  • Save for retirement?


Most people don’t realize the risk of becoming disabled, permanently or temporarily, at some point in their lives. But the reality is that at age 40, your chances of becoming disabled for 90 days or more prior to age 65 is 43%. (Source: 2004 Field Guide, National Underwriter).

When evaluating the chances of disability, you should carefully consider sources of available funds:

Employer Coverage

How long would the business continue to pay you? How much would they pay you? When would your employer have to hire a replacement? Could the business afford to pay both?

Using Savings

If you saved 10% of your income each year, one year of total disability could wipe out 10 years of savings. Can you afford that?

Obtaining a Loan

Without an income, who will lend you money?

Working Spouse or Partner

Can your spouse or partner earn enough and be a companion, parent, private nurse, and employee — all at the same time?

Selling Investments

Will a sale under forced conditions bring a true value? What will their value be at the time you are disabled?

Collecting Social Security

You cannot collect benefits until the end of the fifth full calendar month of total disability and only if it is expected to last 12 months or more. What will you do if your disability doesn’t meet those requirements? Even if it does, can you wait six months for payment?

Counting on Friends, Family or Charity

Would these sources have funds for you to use? Do you want to depend on them?

Many different disability insurance products are available to help protect you and your family against severe financial hardship that may accompany a disability.

In a Changing Economy, Protect Your Most Valuable Asset: Income

If you were asked to identify your most valuable financial asset, what would you answer? Your home? Your investments? Your savings? If so, you’d be in good company. Yet none of those things are possible without income.

“Income is our most valuable asset,” says Sandra Botcher, Vice President-Disability Income Insurance at Northwestern Mutual. “And it’s more important than ever to protect our ability to earn income.”

Northwestern Mutual’s 2013 Planning and Progress Study illustrates the income pressure many continue to experience in this ever-changing economy. According to the study, Americans feel like they’re falling behind in their savings goals, and nearly a quarter of those surveyed said they’ve dipped into their retirement or savings in the past few years to tide them over.

“Clearly, there remains anxiety about the economic environment,” says Botcher. “The good news is, there are simple steps we can take to protect our ability to earn income. And when we do, we free ourselves to live the life we envision—today and in the future.”

What’s involved in protecting income? There are two basic factors that can impact our long-term ability to earn money: death and disability. Death is inevitable, so most people appropriately purchase life insurance to protect the financial welfare of those who depend on them. However, the economic hardship caused by a disability is just as real, but often overlooked.

“In fact, we are twice as likely to become disabled before the age of 65 than we are to die prematurely,” says Botcher. “Even a relatively short disability could have a significant impact on our ability to meet our basic expenses, let alone our short-term savings and long-term retirement goals.”

Only a minority of Americans purchase disability insurance, in part because they don’t realize how easy it is to become sick or injured to the extent that their ability to work would be affected.

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What Is Disability Income Insurance?

Disability Insurance, or DI, is a type of health insurance that pays a monthly income to the policyholder when he or she is unable to work because of an illness.

Short-term disability (STD) plans provide insurance coverage and benefits for a couple of weeks or as long as two years.

Long-term disability (LTD) policies typically cover an individual for a couple of months but could be purchased to provide benefits for the rest of the insured’s life.

STD and LTD policies have waiting periods that insureds must satisfy before receiving benefit payments. Waiting periods for STD policies typically last a couple of weeks while LTD plan waiting periods may last a couple of months. In some instances, the waiting periods can be waived if the disability is evident, such as a broken arm. Disability policies may allow insureds to stop paying premiums if they are disabled for longer than 90 days (waiver of premiums) and increase coverage amounts at a later time (additional purchase benefit).

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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