financial expenses and disability insurance

Disability and Loss of Income – 10 Expenses to Consider

Disability and the experiencing loss of income has huge financial implications that few are prepared for. Without the ability to maintain a steady income, workers may fall behind on utilities, mortgages, etc. and have trouble making ends meet.

In fact, about 77 percent of consumers (shareable infographic) said they would not be able to pay their bills for more than a year if they suffered a loss of income, according to the Council for Disability Awareness. However, the time those who are disabled are out of work is often more than two years, according to the CDA.

The recent Disability Insurance Awareness Month highlighted the importance of coverage in case you are unable to work. If you have to spend days, months, or even years away from the office, disability insurance could give you the funds to cover that loss of income and pay your bills.

Here are 10 expenses you need to prepare for in case of a disability:

1. Medical Costs

Once you experience a disability, you may be required to visit specialists, perform medical tests and buy medications to help you recover and treat your condition. These expenses would be in addition to your regular expenses you’re expecting to pay. The last thing you should have to think about during a disability is to figure out to pay for treatment.

If you don’t have enough funds in your savings, you may end up resorting to putting charges on your credit card—and you could go into medical debt.

About 43 million consumers  (PDF) have delinquent medical debt on their credit reports, according to the Consumer Financial Protection Bureau.

2. Loss of Income

In the case of disability, not only would you have to cope with medical bills stemming from your injury or illness, you would also have to deal with income losses from missing work and recovering. Some may be fortunate enough to have saved vacation or personal time off, but how long could that last? What do you do when your PTO runs out and you still don’t have a paycheck?

The loss of several paychecks—or more, depending on how long you are out of work—is not to be taken lightly.

3. Utility Bills

Keeping the lights on — and other basic utilities — is a necessity for everyone. A leave of absence from work and the subsequent loss of income may make it harder to pay for gas, heating and electricity. To complicate things, if you’re not working, you’re most-likely stuck at home all the time. The creature comforts, or loss of creature comforts become more noticeable when you can’t escape from them.

Do you have enough emergency savings to cover what could potentially be many months of utility bills?

4. Rent or Mortgage

Housing is usually the biggest single expense for consumers. Also, keeping a roof over your and your family’s head is paramount. You could risk eviction or foreclosure if you fall behind on your rent or mortgage.

Since a disability stretching for more than two-and-a-half years could equal 135 weeks of missed paychecks, you may have to dip into your savings to pay for your housing.

5. Internet and Phone

If you were disabled and couldn’t work, you would still need to account for the services provided by your Internet and phone companies. You still need to stay in touch with family, be able to contact doctors, etc.

You could choose to cut your service package or switch to a lower-cost plan but for most, not having internet or phone is not an option.

6. Food Expenditures

Disabilities often bring on a change in both your budget and your health situation. In either case, you may need to change eating habits or follow a special diet to accommodate your medical condition. While cutting back on dining, food is another one of those things we can’t do without.

7. Transportation and Gas

If you were disabled, you would need to take into consideration how you would get to and from doctor’s appointments, the pharmacy and other places. If you were to find a car too expensive, you might opt to take public transportation instead.

8. Insurance

Although insurance—health, car, home, renter’s, and other policies—often only makes a small dent in your regular paychecks, in the case of a loss of income, you would still need to take this expense into consideration.

Add up how much you would require in cash reserves to stay current on insurance for a yearlong disability or longer.

9. Child Care

If you were disabled with a condition that would mean you needed more child care services, you would need to budget for this higher cost.

For example, if you were disabled, you may need someone else to watch over your children while you visit doctors and other medical appointments.

10. Fees and Interest

While you could put all your household bills on your credit cards, this may be an unsustainable way to pay your expenses in the case of a loss of income.

Not only would you have to deal with rising payments from interest, you also risk having fees from overdrawing on your limit.

All of these considerations make a loss of income resulting from disability a big challenge. But if you carry the proper income protection coverage, you could get back on the job without the added stress of bills piling up in the background.

Source Council for Disability Awareness
Image courtesy of frankieleon 

Accidents Can Happen to Anyone – Disability Insurance Can Protect Your Income if it Does

“Who would have expected to be permanently disabled from a broken arm?”

Delayed Social Security Disability Benefits forced Monica to use her retirement savings after a simple broken arm turned tragic.

Monica had it all by the age of 37: A successful career in the financial field, a wonderful son, and big dreams for the future. She never dreamed a disability would change her life forever.

But, in January 2003, Monica stepped off a porch and slipped on the wet ground. She went down, trying to brace her forward fall by stretching out her arms for support. Her right elbow, shattered in a dozen places, needed to be surgically repaired.

After initial recovery, Monica developed osteonecrosis, a condition known as “dying of the bone.” Monica’s humerus bones started to crumble and she became confined to a wheelchair. Monica eventually hired a caretaker to help her do basic daily tasks, such as bathing, eating, and dressing.

Read more

Young business woman learning about disability income insurance policy components.

Everything You Need to Know When Buying Disability Insurance

There are a lot of things to consider when buying disability insurance. Just like other types of insurance, the decisions you make will affect your disability insurance benefits, coverage and premiums. The best way to make sure that you’re making responsible decisions is to evaluate your situation and long term needs. Below are important factors from that can help you when buying disability insurance.

Amount of Coverage

While there’s no substitute for a thorough needs analysis conducted by an insurance professional, you’ll find that most policies cover between 50% and 70% of your income. When thinking about how much coverage you need, consider both short-term and long-term expenses, as well as any other sources of disability income, such as investment income or group disability income coverage.

Group Disability Coverage

Some employers, including most larger ones, offer group disability insurance. However, an employee may still need to consider individual disability insurance because the coverage offered by the company might be insufficient. In this case, the amount of individual insurance you can obtain will be affected by the amount of group coverage you receive.

Elimination Period

This is the amount of time you are required to wait after a disability occurs before you can receive benefits. It can vary from as short as 30 days to 90 days or longer. Longer elimination periods generally translate into lower premiums. However, you should be certain that you could afford to meet all of your immediate needs for that period of time if you were to become disabled.

Benefit Period

Another policy option concerns the amount of time you will receive benefits. They can last for between one and five years, up to age 65, or even for life, depending on your specific needs. The benefit period will directly impact your premiums—the longer the period, the higher the premium.

Taxable or Tax-Free Income

When employers pay your insurance premiums, the benefits you receive will be taxable because they are considered income. If you pay your premiums with after- tax dollars, then your benefits will be tax free (according to current IRS regulations).


When considering the amount of coverage you need, keep in mind that you will probably want to continue funding your retirement needs, even if you are not working.

Definition of Disability

Some plans pay claims if you can no longer perform the duties of your current occupation, while other plans will pay benefits only if you are unable to perform the duties of any occupation. Still others will pay benefits based upon loss of earned income. Each option offers a different level of cost and benefit.

Content reproduced with the permission of Life Happens, a nonprofit organization dedicated to helping consumers make smart insurance decisions to safeguard their families’ financial futures. Life Happens does not endorse any insurance company, product or advisor. © Life Happens 2015. All rights reserved.