You have your life insurance in place, your 401(k), and you are starting to save for your kids’ college or your dream retirement home. Think you have it all covered? What if you have a serious accident or contract a life threatening illness? Your health insurance would pay for the medical bills, and long term care insurance might kick in at some point if it were serious enough. But these would not pay your bills or provide income. You could run through all of your money and lose everything.
You might think this unlikely to happen, but in fact if you are between 25 and 55 years old, you are more likely to become disabled than you are to die. And you can’t count on being able to get Social Security disability benefits—the process is very long and protracted, and you may never get approved.
So, the best thing to do is buy a disability insurance policy. You may work for a company that offers a disability group policy, and you might either get it free or at a small cost. The problem with this type of policy is that they often have significant limits on benefits, and you can’t take it with you when you leave the company.
A private policy generally costs more, but it also typically offers more coverage. You can also buy a private policy to supplement a group policy.
Should you buy short-term or long-term disability insurance or both? Short-term generally pays out for a maximum of two years, whereas long-term can pay out until 65 years old, or sometimes until death.
Buying disability insurance is an important step, and an estate planning lawyer can help direct you to the right plans to fit your family’s financial needs.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.