With unemployment at a 26-year high of 9.5 percent, all is not lost. The number of newly laid-off workers filing for unemployment insurance has actually been dropping since early April. Granted, that's partly due to fewer jobs from which to lay people off...
Meanwhile, companies such as 1,500-employee Nyorecon are making company-wide pay cuts, and the self-employed like Dallas-based PR rep Amy Power are cutting retainers to save the customers still on the books. But business keeps plugging on.
The Partnership for Retirement Education and Planning reports reports that workers' salvation will be in "lifeboats" such as disability insurance to protect against the unexpected. (You can calculate your odds for disability here.) Disability insurance can be had for about $20 per month.
Seven out of 10 employees between the ages of 35 and 65 will at some point in their career be disabled for three months or longer, according to the Health Insurance Association of America (a trade association made up of more than 200 private health-care companies). With long-term disability insurance -- regardless of whether the injury is sustained on the job or not -- policy holders get 50 to 80 percent of their salary for those three months, or longer, while they're unable to work. (You can check with this tool: Is There a Gap in Your Disability Plan?)
These types of policies also are available to pay for regular expenses -- such as mortgage, credit card or insurance payments -- in the event of disability. My mother just exercised her disability option on her whole-life policy, and continues to reap her growing life insurance benefits while no longer having to pay her monthly premiums.
Once your lifeboat is in place, be prepared to use it. Thirty-eight percent of the workers injured above did not file for workers' compensation, and I would venture to guess that disability insurance claims may follow the same track. Use this benefit that you're already paying for!
The first step toward doing that is by finding out the criteria that classifies you for disability. In some policies, disability pay kicks in with as little as losing 10 percent of your hearing or sight. You may already qualify.
Assignment: Do you have a disability policy in place? Think about the extra policies you may have tied to paying your health insurance costs, home mortgage or credit cards in the event of disability. If you don't, would it be worthwhile for you to add it? If you do, what does your disability policy classify as a disability?
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| Jennifer D. Meacham, Gather Money Correspondent | ||||
Jennifer's column, "The Bottom Line," is published weekly to Gather Money Essential. Jennifer is a business and personal finance reporter who also covers money matters for Fisher Communications' television news websites and Baby Boomer news site RedwoodAge.com. She comes to us as co-author of the best-selling retirement investing guide "IRA Wealth: Revolutionary IRA Strategies for Real Estate Investment" (Square One Publishers, New York). Keep up on the latest news and analysis into how you can take control of your business and personal financial future by joining Jennifer's "Self-Directed Investing 101" network. | ||||
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Comments: 10
Thanks, Jennifer. As one who was injured on the job - and before the long-term disability insurance kicked in, although I had been paying for it - I discovered that worker's compensation claims are not treated the same in every state. It's amazing what differences there are, actually. And it's amazing that worker's comp doctors can say you're not able to return to work, but that you have reached "maximum medical improvement" and therefore your worker's comp pay will be discontinued. There is no warning when that happens. One week you have it and the next you don't. It makes sense to pay a little extra when you buy a car or get a loan or credit card debt to pay for disability insurance and it certainly pays to do so at work. The government system is not something on which we can rely. (And getting permanent SS disability is a whole other topic. I've been waiting for 6+ years.)
RE: And getting permanent SS disability is a whole other topic. I've been waiting for 6+ years.
I know several others in the same boat. Thank you for the background on the other details as well Marilyn. Valuable insight.
I also tell people that as hard as it can get, moving to another state, whether you're dealing with worker's comp issues or SS disability, creates problems. I learned that the hard way. I've been in Cincinnati now since late 2004 and if I could find a doc to treat my knee, Texas would pay for that forever (just not income, but medical). But in most states, docs won't take on "old" worker's comp cases from another state.
Excellent point Marilyn.
I agree the numbers can be misleading. In a lot of businesses there is no one left to fire with out folding.
Thanks for the note Brian. Well said.
$20 a month is a lot less than the $140 price I heard about!
They take almost a hundred dollars out of my check per month. I am seriously considering cancelling it as my check is very small.
Who's "they" JoAnne?
I am a strong advocate of diasability insurance while we have earnings. Group disability insurance is generally cheaper than what we can buy privately, and we must consider waiting period, ownocc, term of disability, and payout percentage based on the current income.
I've heard that you are 20 times more likely to become disabled than to die while you're working. So it's a must for working people, especially if you have dependents. Unfortunately you cannot get a disability insurance for stay at home moms. But you can buy a cheap level term life insurance in case she is severely injured and crippled or die.
One other thing I advocate is the long-term care insurance when you turn 60, while working and in good health. The premium is locked in on the day it is issued, which is still affordable (I pay $1,200 a year). My wife also has the same 5 year disability with 90 day waiting period for $800 a year. It's one of the better investment to protect our assets.