Do Young Professionals Need Disability Insurance?
When young professionals enter the workforce, they are faced with financial obstacles that leave little time to learn about insurance. However, when young adults choose to skip insurance coverage they don’t think they need or don’t understand, they may be financially unprepared if the unthinkable happens. This is why it’s important to contact one of our Boston disability lawyers to receive help today.
This is especially true when it comes to disability insurance, which should be a necessity for young professionals. Here are three reasons why.
1. Disability can happen at any age.
Many young Americans disregard disability insurance because of their age and health. However, disability does not discriminate; anyone, at any age, can suffer a disabling illness or injury.
According to the Social Security Administration, one in four of today’s 20-year-olds will become disabled before they retire. The leading causes of disability often differ from a millennial’s perceptions, which may further deter them from buying disability insurance.
According to Council for Disability Awareness 2014 Long-Term Disability Claims Review, the following were the five leading causes of new disability claims in 2013:
- Musculoskeletal/connective tissue disorders (28.6%) *
- Cancer (15.1%)
- Injuries and poisoning (10.6%)
- Cardiovascular/circulatory disorders (8.7%)
- Mental disorders (8.3%)
* This category includes claims caused by neck and back pain; joint, muscle and tendon disorders; foot, ankle and hand disorders, etc.
2. You can’t count on Social Security.
Many Americans – regardless of age – believe Social Security disability benefits will offer them sufficient coverage for their basic expenses. However, SSDI benefits are surprisingly modest, as they are intended to help you meet basic living needs, not replace all of your list income.
Social Security paid an average monthly disability benefit of $1,166 at the beginning of 2016, a figure that is barely enough to keep a beneficiary above the 2015 poverty level.
The Bureau of Labor Statistics also reports that a typical millennial earning the median U.S. wage would lose $2,419 per month if SSDI was their only source of income.
Age also plays a significant role in who qualifies for SSDI benefits, and young adults are not at the top of the list.
3. It’s more expensive to forgo disability insurance.
According to the Council for Disability Awareness, 35 percent of young adults in America find it difficult to cover their expenses every month or live paycheck to paycheck.
When young professionals are struggling to make ends meet, products like disability insurance are considered unnecessary expenses.
However, the cost of a disability insurance policy pales in comparison to the financial effects of a disabling illness or injury, especially if the you do not have a monetary safety net.
Having income protection does not have to be costly; on average, the annual premium amounts to approximately one to three percent of your yearly income. The true cost depends on the features and type of benefits you choose. If you’re a healthy twenty-something, you may find it easier and cheaper to secure modest disability coverage.
Many employers offer group disability insurance plans, which are typically cheaper and easier to qualify for than privately purchased individual disability coverage. While these policies have their drawbacks – including more limitations and taxable benefits – they are popular among working Americans.
A group long-term disability insurance policy is a valuable benefit for a cash-strapped millennial, as some coverage is better than none at all.
However, for budding professionals who switch jobs frequently, an individual disability insurance policy may be a better option.
Individual disability insurance policies have fewer limitations than group policies, provide income tax-free benefits, and can travel with you when you change jobs. While they may require a medical exam upon application, this is less of a concern for healthy young adults than for older working professionals.
For more information
To learn more about long-term disability insurance options, check out our Disability Insurance 101 podcast episode.