Protecting Your Largest Asset
What would you say if I asked you what is your largest asset? Most people would respond, “My home, my car, my boat, etc.” The most important asset for is your ability to earn a paycheck, without that ability you cannot afford the home, the car, the boat. 1 in 4 Americans will experience some type of disability before they reach 65. Most disabilities are not work related, but due to illness. Many people believe that Social Security will cover them if they are found to be disabled.
Let’s address some of these statistics:
1 in 4 Americans, if you are from a four-person household that means you may be the person suffering from an illness that stops you from being able to work. If you are the primary bread-winner, do you have enough to pay all your bills while waiting the average 2-year period before Social Security may approve you for benefits.
Common phrase heard, “Well, my work has workman’s comp insurance.” Yes, they do but that only protects you if you are injured on the job in relation to your job, not if it is an illness. What happens if you have been diagnosed with an illness that allows you to work but not 100% of the time?
Social Security will not pay unless you are deemed 100% disabled. Based on Social Security Annual Report 2013, 59%1 of claims are denied. Therefore, if it is a short-term illness: heart attack, surgery, etc. that could see you not working for less than 2 years, Social Security is not going to pay your bills.
So what can you do to protect your largest asset from the unexpected? Personal Disability Insurance, also called, Paycheck Protection. 36% of Americans live paycheck to paycheck, and without a safety net, have no way to provide for the family. Disability Benefits Insurance is customized based on your personal needs: you and your agent will work together to find that information. It consists of your benefit amount (based on current income), waiting (elimination) period, benefit period (how long do you need the coverage for).
Benefit amount: since, you have bought the policy from after tax dollars, it is your policy and is paid out tax-free. It will normally be about 60-65% of your current income, but since there are not taxes it will be about the money you make right now. Now, if your income increases as you own the policy there are additional add-ons if you want, but that is not part of this article.
Waiting period, this is how long before the benefits start paying out if you are deemed disabled, whether partial or wholly disabled or if it is just for a limited time. Typically ranging from 30, 60, and 90 days.
Benefit period, consists of if you want a short-term policy or long -term policy, depending on profession, you may only pick a plan of 2 years, 5 years, or until retirement.
Give us a call (904) 730-3900 or come into Thomas and Associates, so we can tell you more about ways to protect your paycheck, and if you are self-employed ways to protect your business too from disability.