Are You Protecting Your Most Valuable Asset?

Written By: Terrance J. O'Brien
March 24, 2009

Many people consider their home and cars to be their most valuable assets.  Usually a lot of thought and consideration is given about the best way of protecting the home against fire, flood and theft.  Additional thought is given to protecting against auto-related damages and injuries.

What is your most valuable asset?

Your income is your most valuable asset.  This is the asset that makes owning a home and car possible.  Your income determines your level of living and funds your long term financial goals.  Your income is at risk if you suffer a disability, through sickness or accident.  

The Risk of Disability – Could it happen to you?

The facts: 

• A 20 year old worker has a 3 in 10 chance of becoming disabled before reaching retirement age. (www.socialsecurity.gov/ddibplan)
• A disabling injury occurs every three seconds in a public setting and every 4 seconds in a home. (National Safety Council “Injury Facts” 2007 Edition)
• The numbers of workers who have become disabled has risen by 35% since 2000 according to the Social Security Administration.

What are the leading causes of disability?

Most people think the leading cause of disability is accidents. If you are of this school of thought then you are in for a surprise. The leading causes, according to the Council for Disability Awareness, are cancer, heart disease, back and spine problems, diabetes and depression. 

How do you protect your income?

You protect your income by purchasing disability income protection insurance. You buy this protection with good health. The healthier you are the greater the chance of being offered coverage. Unfortunately, not everyone will qualify for coverage due to existing medical conditions. 

Your disability insurance company may require a medical exam and lab test before approving the coverage. Often third party verification, which includes copies of medical records, is required prior to issuance of a policy. 

What do you look for in a high quality disability income protection policy?

Buying disability income insurance is an important decision that could impact your hopes, dreams and financial stability. It’s important to understand how disability income protection policies work and how they differ from company to company. 

Look for these basics in the policy: 

• Cannot be cancelled by the insurer, except for non-payment of premium, and is guaranteed renewable. Guaranteed renewable means the insurer cannot increase the premiums.
• Pays a monthly benefit if you are totally disabled in your own occupation even if you can work in another occupation.
• Offers a variety of built-in policy provisions designed to protect your interests.
• Offers a selection of optional benefits, known as riders. These riders are usually available for an additional premium. This allows you to create a policy best suited to your specific needs.

What are the most important questions to ask before purchasing disability income protection?

• What is the definition of total disability in the contract? This is the key differentiating factor in how valuable the policy will be during an actual disability.
• How much monthly benefit should I apply for?
• How soon after disability are benefits payable?
• How long should the benefits last?
• How do factors such as occupation, income, and health status influence the cost of coverage?
• What other optional benefits should I consider purchasing?
• What are the financial ratings of the insurance company?

The five factors that determine the premiums:

1. Occupation
2. Health
3. Age  
4. Income
5. Policy Design 

Summary

You can safeguard your lifestyle and your future financial well-being by purchasing disability income protection. The terms, conditions and options of the policy are very important, and should be reviewed in detail. Make sure you work with an insurance agent that understands disability income protection insurance. Pick an insurance company with high quality financial ratings. Keep the policy in force during your working years. You might not get another chance to buy the coverage. 

 
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