How Much Disability Insurance Do You Need

DISABILITY: HOW MUCH IS ENOUGH?

1. Add up your monthly "must pay" expenses $ _________________

2. Subtract any investment income _________________ (also include any 401(k) loans or income from other sources)

3. Subtotal _________________

4. Enter monthly long term disability employer payments _________________

5. Add spouse's take home pay _________________

6. Subtotal _________________

If line 6 is greater than line 3, there is apparently ample funds for a disability. If line 3 is greater, than that represent the amount of a disability that might be considered. One must also consider that the expenses during a disability may be increasing and at an increasing rate greater than the investment income is increasing.
Further, remember that most disability payments from an employer are NOT increased for inflation, so a long term disability can be devastating- particularly if the spouse was not working.

One may also self insure for long term disability by using up principal as well. Though not a complete analysis below, it identifies a basis time frame

7. Add lines 3 and 5 above __________________

8. Subtract the short term disability benefits from employer _________________

9. Subtotal _________________

10. Enter the amount of savings (principal) you would use for disability __________________

11. Divided line 10 by line 9 ___________________

12. This is the number of months you can get by without long term disability coverage.

I would suggest you review the odds on disability insurance before opting not to buy a policy.

DISABILITY: (HIAA) In 1996, the most frequently cited single cause for disability claims was for back problems, followed by emotional/psychiatric problems, neurological problems, and problems with extremities

Disability: the 2002 U.S. Group Disability Market Survey, finds that while new premiums from group disability sales last year increased 1% to $1.7 billion, the number of employers offering it remained flat and the number of insured employees grew only slightly.

Inforce premium grew about 5% to $9.3 billion, with long-term disability's portion rising 5% and short-term disability's piece increasing 6%. Meanwhile, although LTD sales showed a 5% increase, STD sales actually dropped 6%. Moreover, the number of insured employees went up only 1% for LTD and 2% for STD.

The discrepancies in the number of new sales and the growth in premiums may be explained by the fact that the top 10 insurance carriers handily control the group disability market, writing 80% of new STD business and 82% of new LTD business. They also collect the vast majority of inforce premium -– 77% of STD premium and 81% of LTD.

Disability Insurance: ( 2003) In small private firms, fewer than one-quarter of workers have short-term disability coverage (22%), and just 13 percent have long-term disability income insurance, according to the Bureau of Labor Statistics.*

half of workers at large employers (100 or more employees) have short-term disability income insurance (47%), and more than one-third have long-term disability coverage (40%).

Disabled: (2004) Most the number of disabled Americans under the age of 60 has increased over the past 20 years, and obesity is considered to be the primary factor. The 30-39 age group experienced the most dramatic increase, with a 50 percent increase in the number of people who are disabled. The study also found that disability rates declined by 10 percent among the 60-69 age group. This increase in disability as a result of rising obesity rates could threaten the advances that have been made in extending life expectancy and improving the quality of life for older Americans.

Disability coverage (American Council of Insurers 2004) 82% of employees are lacking in adequate coverage.

The Society of Actuaries says that only 2.5% of employees have individual disability coverage.

Disabled (WSJ 2005) Nearly one-third of parents of special-needs children haven't even done the basics of financial planning and 85% turn to doctors rather than financial professionals for advice about money.

About 60% of the 1,718 parents polled said they didn't expect their children with special needs to ever be financially independent. Yet despite that, 68% of parents hadn't written a will, and 72% hadn't identified a trustee to administer the child's finances.

Disability insurance: (2005) one in three people will experience a disabling impairment for at least 90 days prior to age 65. Of those with disabilities that last at least 90 days, the average disability will last for an additional 5.5 years (Life Association News, March, 1994).

Hard to believe Disability claims: A 2001 study found that the SSA was taking an average of 1,153 days to process a typical disability claim but that SSA employees spent an average of only about 7 days actually working on the claim.

State disability programs took only 3.5 months to process disability claims