The United Stated has a population of about 327million people. About 40% of our population or over133 million Americans suffer from a Chronic Illness. And about 81 million Americans have multiple conditions. I am one of the 40% and suffer from an autoimmune disease called Sarcoidosis. I know first hand how a chronic illness can have a negative impact on your career and finances.  Today’s blog will give some suggestions how to survive the financial impact if you can no longer work due to an illness or injury. 

A chronic disease/illness as defined by the U.S. National Center for Health Statistics, is a disease lasting three months or unfortunately in many cases a lifetime.  Some typical chronic diseases include: Alzheimer’s, Dementia, Rheumatoid Arthritis; Cancer; COPD; Crohn’s Disease; Cystic Fibrosis; Diabetes; Heart Disease; HIV; Bipolar; Cyclothymiacs; Depression; Multiple Sclerosis, Parkinson’s; Pulmonary Disease; Cardiovascular Diseases, such as Heart Attacks and Strokes, Autoimmune Disease, such as Sarcoidosis; and unfortunately many more.

INCOME AND YOUR NET-WORTH

Your greatest asset to building your net-worth is YOUR INCOME.  You will earn millions of dollars over your working years!  If you earn an average of $65,000 annually for 40 years, you will have earned $2,600,000. What happens to your income if you are struck by a debilitating chronic illness or suffer a serious permanent injury?  Suddenly you may have zero income. Your risk of being unable to work because of an illness or injury is greater than the odds of a premature death. Majority of us probably have life insurance especial if we have family.  Do you have disability insurance to help support yourself and your family if you are unfortunately one day unable to work during your peak earning years? 

WORK RELATED INJURIES/ILLNESES

In the event you are disabled due to a work-related accident or illness, majority of employees are covered under workers’ compensation. I have years of experience, managing workers’ compensation programs for major corporations. “Workers’ compensation is a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee’s right to sue their employer for the tort of negligence. Provision can be made for weekly payments in place of wages (functioning as a form of disability insurance), compensation for economic loss (past and future), reimbursement or payment of medical and like expenses  and benefits payable to the dependents of workers killed during employment.”

EMPLOYER PROVIDED SHORT AND LONG TERM DISABILITY INSURANCE

Disability insurance replaces a portion of employee’s income when they cannot work because of an illness or disability. Disability insurance provides wage replacement benefits that cover, on average, up to 60% to 66% of employee earnings. To cover more of your income you can consider buying a private/individual insurance disability income policy to supplement your Company group plan or provide coverage if a group plan is not offered. When employers offer disability insurance, they typically pay the full cost of coverage for most workers. 

In 2018, 42 percent of private industry workers had access to short-term disability insurance plans and 34 percent to long-term plans. Twenty-six percent of state and local government workers had access to short-term coverage and 38 percent to long-term benefits.

DISABILITY TERMS DEFINED

There are many definitions of disability utilized by the disability insurance industry.  Some major polices include: 

• OWN OCCUPATION INSURANCE POLICY:  Covers individuals who become disabled and are unable to perform the majority of the occupational duties that they have been trained to perform. This type of insurance policy is contingent on the individual being employed at the time the disability occurs.  You will be considered disabled if you are unable to perform each and every responsibility of your current position.  
• OWN OCCUPATION NON CANCELLABLE: This policy basically guarantees that once issued, as long as you pay your premiums, which cannot be increased, your policy will remain in effect.
• MODIFIED OWN OCCUPATION: means you are unable to perform the specific occupation you were engaged in at the time you became disabled, and not working in another occupation. Just as with traditional “own occupation” definitions, most policies provided with “modified own occupation” to medical and dental professionals and lawyers define “own occupation” as the specific specialty you practice within your field. Sometimes “specialty letters” specifically providing this explanation were provided with your policy when it was issued.
• ANY OCCUPATION: policies define disability more narrowly, as the inability to work in any gainful occupation for which you are reasonably suited, considering your education, training, and experience.  In other words, if you can work in any gainful occupation, you will be denied benefits.  This is typically the group policy employers purchase, to save cost
• PARTIAL BENEFIT-POLICY: A “partial” benefit will pay you if you cannot work and suffer a loss of income as a result of being unable to perform at prior capacity because of injury or illness. Partial disability is defined as any type of disability in which the workers is unable to perform at full physical capacity.

HOMEWORK – I RECOMMEND YOU RESERACH BELOW:

1. Does your company/employer have a Group Short and Long Term Disability Policy?
2. If yes, ask for a copy of that policy and determine what type of coverage you actually have.  The percentage of your wages you are covered?  What  definition for disability is covered?  See above definitions.  File the policy somewhere you or your family can find it.  This is the same advice for all your insurance policies {Home, Life, Auto, Disability, Long Term Care (a future topic) and Umbrella Policies}
3. Given your current and future expected expenses, is this policy (the benefit amount) adequate?

NEXT WEEK CONTINUATION

Next week I will discuss how much disability insurance is typically recommend and other nuances.  As well as precautions needed if you should lose your job, that provided the Group Disability Insurance.

CONCLUSION

You have to medically qualify for disability income insurance. The younger you are, the better the chances of purchasing a policy.  While I purchased my first life insurance policy when I was in college, (I did not need it but fell for Greg’s sales pitch) it was years later I became educated on the value of disability insurance. In later years, managing workers compensation for several multi national companies I begin to recognize a major need, but often not purchased, is disability insurance.  The goal of Wealth Building Powers blogs, is to educate my readers on the accumulation and PROTECTION of wealth – your net-worth.  Short and Long Term Disability insurance policies are a NEED to protect you and your family. 

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DISCLAIMER

I am a proud nerd (my beautiful wife and daughter told me so) investment and finance blogger, with University Rutgers, MBA and Harvard University, Advanced Management.  

I am a successful investor in equities and real estate and happy to share my personal finance and investment lessons learned with you. I am NOT however, a licensed financial advisor.  Please do not construe my suggestions on this blog, as recommendations for your personal situation.  For individual finance advice please seek your own licensed CPA or financial advisors.