Dan Kampani, CLTC

Disability Insurance For Everyone

Becoming disabled through an injury or sickness can mean a significant loss of income. Disability insurance is a form of health insurance that provides a person who becomes disabled with income to cover living expenses that continue in spite of the disability.

What is disability?
a) The inability of the insured to work and perform the duties of his or her usual occupation, when the insured is not otherwise working. The key word here is 'usual' occupation. Therefore, a hair stylist who cannot work with hands anymore because of the muscle weakness would be disabled. However, if the insurance company has placed a requirement that the disabled person is not working because of injury or disease, the hair stylist who cannot style someone's hair anymore but can train others to do so is not considered disabled.

b) The inabilty of the insured to perform duties in any occupation for which he or she should be able to work due to education, training and experience. Thus, the hair stylist with muscle problem would not be considered disabled if he or she can take up some other job.

c) The inability of the insured to work at all.

It is often stated that one third of the national work-force will suffer a disabilty for a least three months at some point of time. Who or what will take care of our expences once disability hits?

Following are some of the reasons why people do not buy disabilty insurance:

"SOCIAL SECURITY WILL COVER ME"

This thought is so comforting to most of us that we stop bothering ourselves from looking into hard facts. The Social Security Administration[SSA] does not cut a check and mail it right away just because you believe you are disabled. There is an evaluation process that applies to all applicants for disability benefits:

Are you doing 'substantial work? The SSA defines as 'substantial gainful activity' as the performance of significant mental or physical activity that is productive in nature. As long as you are making $500 or more per month doing part-time your activity is considered gainful. And so your application is denied.
Whether you have a severe impairment which causes you to be unable to do any gainful activity.
Does your impairment meet or equal the level of severity described in the published 'listing of impairments' maintained by SSA.
Are you able to do relevant work that you did in the past?
Are you able to any other work?

No wonder "nearly 70% of all disabled people that apply, are rejected for Social Security benefits." [Social Security Annual Statistics (1999) "Social Security Bulletin," Vol. 63, No. 2, 2000.]

"I HAVE WORKER'S COMP"

Worker's Compensation covers you for disability caused by an injury at the place of work. Who will take care of your bills if you slip in your bathroom and go on disability for six months?

Also consider the following facts:

Approximately 54 million Americans currently have a disability. This figure represents 21% of the total population of the United States.[McNeil, J.M. (1997) Americans With Disabilities: 1994-95, "U. S. Census Current Population Report," PP 70-61, Washington, D.C.: US Department of Commerce.]
Each year nearly 1 in 5 people will become disabled for one year or more before the age of 65. [McNeil, J.M. (1997) Americans With Disabilities: 1994-95, "U. S. Census Current Population Report," PP 70-61, Washington, D.C.: US Department of Commerce.]
Nearly 50% of all home foreclosures are caused by unforeseen disabilities.[Mortgage Foreclosures in the U. S. (1990) "Million Dollar Round Table Reference Guide," PP 6.15.1.]

The fact is if and when disability strikes, your best friend will be your disability insurance policy. Remember, no matter how thought out your financial plan is, disability can ruin it for you.

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