Individual Disability
Individual Need for Disability Insurance
Many people believe that their biggest asset is their home. For most of us, our biggest asset is the ability to work and earn an income. Not being able to work - due to a job loss or a disability having taken away the ability to work - is often financially devastating.
Everyone who works for a living is familiar with what can happen if they lose their job. On the other hand,the possibility of a serious disa bility is a risk few seem to consider. How likely is it that you will become seriously disabled? According to one study, 30% of all Americans between the ages of 35 and 65 suffered a disability lasting at least 90 days. The risk is real. The question is, "What to do about it?"
Don't Count on Social Security
A few individuals do manage to qualify for disability benefits from Social Security. However, the Social Security definition of "disability" is so strict that, in 2012, only 35.0% of initial claims for Social Security disability benefits were accepted. Obviously, something else beyond Social Security is needed.
Group Disability Insurance
Many employers will provide - or make available - disability insurance on a group basis. However, even those who are covered by a group policy can still be at substantial risk. Employer-sponsored disability policies seldom replace more than 60% of your monthly salary. Further, many policies have a monthly maximum benefit that may be far less than what some people earn. Income taxes can also be an issue; if the employer is paying the full cost of the coverage, and not including it in the employee's income, disability benefits are fully taxable. If an employee pays for disability insura nce with after-tax dollars, the benefits are received free of income tax.
Request A QuoteHow Individual Disability Income Works
Impact of Disability
While most Americans insure their lives and physical possessions such as their homes, cars, etc., many overlook the need to protect their most valuable asset - the ability to earn an income.
How likely is it that someone will become disabled? The table below, developed using data collected by the federal government, shows the number of working-age Americans who have a disability that affects their daily lives.
Individuals with Disabilities by Age
| Age Range | No Disability | With a Disability |
|---|---|---|
| 5-17 years | 95% | 5% |
| 18-34 years | 94% | 6% |
| 35-64 years | 87% | 13% |
| 65-74 years | 74% | 26% |
| 75 years and over | 49% | 51% |
Probability of at Least One Long-Term Disability Prior to Age 65
| Age | |
|---|---|
| 25 | |
| Number of People in Age Group | |
| 1 | 58% |
| 2 | 82% |
| 3 | 92% |
| 4 | 97% |
| 5 | 99% |
| 6 | 99% |
| Age | |
| 30 | |
| Number of People in Age Group | |
| 1 | 54% |
| 2 | 79% |
| 3 | 90% |
| 4 | 96% |
| 5 | 98% |
| 6 | 99% |
| Age | |
| 35 | |
| Number of People in Age Group | |
| 1 | 50% |
| 2 | 75% |
| 3 | 88% |
| 4 | 94% |
| 5 | 97% |
| 6 | 98% |
| Age | |
| 40 | |
| Number of People in Age Group | |
| 1 | 45% |
| 2 | 70% |
| 3 | 84% |
| 4 | 91% |
| 5 | 95% |
| 6 | 97% |
| Age | |
| 45 | |
| Number of People in Age Group | |
| 1 | 40% |
| 2 | 64% |
| 3 | 78% |
| 4 | 87% |
| 5 | 92% |
| 6 | 95% |
| Age | |
| 50 | |
| Number of People in Age Group | |
| 1 | 33% |
| 2 | 55% |
| 3 | 70% |
| 4 | 80% |
| 5 | 86% |
| 6 | 91% |
| Age | |
| 55 | |
| Number of People in Age Group | |
| 1 | 25% |
| 2 | 43% |
| 3 | 57% |
| 4 | 68% |
| 5 | 76% |
| 6 | 82% |
| Age | Number of People in Age Group |
|---|
| 1 | 2 | 3 | 4 | 5 | 6 | |
|---|---|---|---|---|---|---|
| 25 | 58% | 82% | 92% | 97% | 99% | 99% |
| 30 | 54% | 79% | 90% | 96% | 98% | 99% |
| 35 | 50% | 75% | 88% | 94% | 97% | 98% |
| 40 | 45% | 70% | 84% | 91% | 95% | 97% |
| 45 | 40% | 64% | 78% | 87% | 92% | 95% |
| 50 | 33% | 55% | 70% | 80% | 86% | 91% |
| 55 | 25% | 43% | 57% | 68% | 76% | 82% |
Determining Odds of Disability Among People of Different Ages
| Age | |
|---|---|
| 25 | |
| Value | |
| .42 | |
| Age | |
| 30 | |
| Value | |
| .46 | |
| Age | |
| 35 | |
| Value | |
| .50 | |
| Age | |
| 40 | |
| Value | |
| .55 | |
| Age | |
| 45 | |
| Value | |
| .60 | |
| Age | |
| 50 | |
| Value | |
| .67 | |
| Age | |
| 55 | |
| Value | |
| .75 | |
| Age |
|---|
| 25 | 30 | 35 | 40 | 45 | 50 | 55 | |
|---|---|---|---|---|---|---|---|
| Value | .42 | .46 | .50 | .55 | .60 | .67 | .75 |
- Step 1: For each owner or key employee you wish to include in your analysis, choose the value from the table above that corresponds to the age closest to the actual age of the owner or key employee, and include the value in the space below.
- Step 2: Multiply all of the values by each other to arrive at a single value.
- Step 3: Multiply the single value by 100 to convert it to a percent.
- Step 4: Subtract the single value from 100% to determine the odds of long-term disability for any one of the groups of owners or key employees in your company.
Note: You can perform this analysis for any number of owners or key employees, not just the five shown in this worksheet.