There’s a common saying in the insurance business and the military: “It wasn’t raining when Noah built the ark.” That’s true! And, it’s important to take that advice to heart. In my business, we sometimes run into the tragic consequence of waiting too long to get disability insurance coverage in place. So what is the best time to buy disability insurance? Let’s find out.
Disability Can Come at Any Time
We recently got a call from a young ER doctor about to finish her residency. She wanted to purchase disability insurance coverage. When I asked about her recent medical history she admitted constant and severe pain in her back and neck suffered in a car accident six months earlier.
After a two week hospital stay and physical therapy, she managed to get back to work. But, the back pain is so severe she can barely finish her shifts most nights.
Unfortunately, I had to tell her because of the severity of her back injury I would be unable to get her coverage. You see, insurance is designed to cover people against risk – which is uncertain by definition. As soon as she got unlucky and was rear-ended in the car accident, a back injury was no longer a risk, but an established fact. Our young doctor was uninsurable.
When I told her there was no way I could help her, she burst into tears. She said, “I spent 11 years of my life and accumulated over $200,000 of debt to become an Emergency Room physician. I don’t know what I’m going to do now.”
I felt awful. I hope I never have to take a call like that again.
The Best Time is NOW
The fact is it’s up to the individual to take the initiative and get coverage in place. The time to do that is now, when you’re healthy.
If she had taken steps to purchase disability insurance at any time before her accident she would be collecting a monthly benefit. She could afford to stay home and recuperate, or even take some time to retrain to another specialty of medicine.
Let's Look at the Numbers
Here are a few statistics:
- According to the Center for Disease Control, about 11.5 percent of Americans are dealing with disability between ages 15 and 44.
- Before the end of their career, 1 out of 5 people will be disabled. If you are a woman, your chance of being disabled is 1 in 4.
- By age 44, 3% of you will have trouble walking three city blocks – 2.6% will have trouble climbing a flight of stairs – 2.3% won’t be able to lift 10 pounds.
- Of those adults with disabilities, 72% became disabled before the age of 55.[1] See, disability doesn’t wait for you to retire.
- 1 in 4 of today’s 20 year old’s will become disabled before retirement.[2]
Workers compensation is unlikely to help. About 9 out of every 10 injuries or illnesses resulting in disability are not job related and will not qualify you for workers compensation insurance.
But: A job-related injury or illness could make it impossible later for you to acquire disability insurance on your own.[3]
Furthermore, disability insurance isn’t medical insurance. It’s not covered by the Affordable Care Act. Disability carriers can and do discriminate against those with pre-existing conditions. Translation: If you wait a day too long, you could lose.
Your Most Valuable Asset
When most people think of their most valuable assets, they think of their homes, their 401(k) plan, and sometimes their closely–held business or their private medical practice.
That’s usually only true for people later in their careers. The real truth is that if you are in medical school, or residency, or just getting started in your own practice, your most valuable asset by far is your future ability to earn a living as a doctor.
The reason to get disability insurance in place early is so you can protect your most valuable asset – and buy that protection at the lowest possible cost.
Tragically, the young doctor who inspired this post waited too long. She had an income to protect already, but she didn’t divert a small portion of that income to protect her own most valuable asset – her career saving lives as an emergency room doctor.
Don’t make the same mistake.
References
[1] Spencer’s research reports on employee benefits, Disability Incidence Higher for Downsizing Firms; Cost Rise, But Integrating Efforts Lowers Costs, Studies Show. 323-1, August 29, 1997.
[2] U.S. Social Security Administration, Fact Sheet February 7, 2013
[3] Council for Disability Awareness, Long-Term Disability Claims Review, 2012
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