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Disability insurance is essential for all California workers

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Most Americans have many types of insurance to protect us in case of unforeseen events. We have auto insurance, health insurance and here in California, many people have earthquake insurance. Most people don't think they will ever need disability insurance. According to a recent survey, nearly two-thirds of workers put their chances of becoming disabled for several months or longer at just two percent or even less.

That is far below the reality. According to the website DisabilityCanHappen.org, the chance of a worker suffering a disability is approximately 25 percent. Over 60 percent of people surveyed said they knew someone who was out of work for at least three months due to a disability.

Becoming disabled, even temporarily, can have a drastic effect on the lives of workers and their families. An executive for Lincoln Financial Group says that "disabilities are behind a significant number of home foreclosures and personal bankruptcies."

Disability insurance helps replace lost income if a person is unable to work due to an illness or injury for months or even years. It is a small price to pay to help protect your family from devastating financial consequences.

The most cost-efficient way to get this insurance is through your employer. A good employer-based group disability insurance plan generally costs no more than three percent of gross annual income, and you get the assurance that you will continue to receive a significant percentage of your income (on average, 50 to 60 percent) if you are unable to work.

There are some important things to consider, whether you get the insurance through an employer or on your own. What percentage of income does the policy pay? What is the payment cap and is it sufficient for your income level? What disabilities are covered? Most cover serious illnesses like heart disease and cancer and severe injuries. Often they cover mental disorders as well.

Avoid short-term disability coverage. This generally pays for up to six months of disability. The average amount of time employees are out is two-and-a-half years.

As the Lincoln Financial Group executive put it, you should think of disability insurance as "part of a comprehensive financial plan." We put aside money to buy a home, put our kids through college and even for vacations. Paying for long-term disability insurance is in essence putting away money to protect our family if we become too ill or injured to work.

Source:  The Street, "You Have a 25% Chance of Needing Disability Insurance" Brian O'Connell, May. 07, 2014

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