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Who plans for a disability?

No one wants to be thinking about a disability in their life, but for many it is a reality that happens very unexpectedly. When you take a look at your disability policy that you have with your employer, for the main part of the population this fringe benefit is really “on the fringe”. Other than for most governmental employees, the disability plan that most people have through their employer will do something like the following: in the event of a disability, it will typically pay about 60 percent of what your income was prior to the accident or prior to the illness.

In addition to being just 60 percent for the vast majority of people, that 60 percent is also taxable, and in addition to that most plans are integrated with Social Security or worker’s compensation (other government programs). What does that mean? Let’s just use some simple math. Let’s say that you are receiving a benefit of about $1000 a month (in disability). If Social Security or worker’s compensation also pays $1000 a month, that means that the disability plan that you have through your employer pays ZERO. You do not get to receive both.

So, think about this. If you are receiving 60 percent of what your earnings were, that means that they believe that you should be able to live on just 60 percent. Or let’s think of it this way. They’re saying that you should be able to save 40 percent of your current earnings now because you only need 60 percent to live the life that you’ve been accustomed to living. Well, we know for the vast majority of people that that’s just not true. You can’t live on 60 percent of what you once had, and then it’s also taxable income, and it’s integrated with Social Security or worker’s compensation, which lowers the benefit still.

How does that affect your life? How does that affect how you live your life for the rest of your life? This is just one of the things that I discuss in my book, Investments Don’t Hug: Embracing the life insurance Asset. Get the book today or research the book at www.investmentsdonthug.com.   

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