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Armchair Millionaire Community Bulletin: Creating a Personal Safety Net with Disability Insurance

By Anonymous

New York, NY June 8, 2004--Wondering if you should have disability insurance? Just consider these sobering statistics:

•    Depending on your age, the chances of suffering a long-term disability (defined as an injury or illness lasting more than three months) are between two and three times greater than dying before age 65. (Commissioner’s Individual Disability Table A)
•    One in three working Americans will become disabled for 90 days or more before age 65, with the average disability lasting 2 1/2 years. (Commissioner’s Individual Disability Table A)
•    More than half of families filing for bankruptcy during the first quarter of 1999 did so at least in part because of significant medical bills. (Norton Bankruptcy Law Adviser, May 2000)

If those figures aren't enough to convince you, consider this real-life story from the Armchair Millionaire community:

"My husband had disability insurance through his employer when he suffered a massive stroke at age 41. He will never return to work and we now live on his disability income and Social Security. Never ever be without disability insurance. You insure your life, your home and your car. Your income is at least as important as any of those things." --Nancy K.

Unfortunately, even though it's an important financial product that I believe most people should have, disability insurance is not especially easy to understand. My guide spells out the basics.

The Armchair Millionaire's Guide to Disability Insurance

What it is. In a nutshell, disability insurance provides you with an income if you become unable to work due to an illness or accident. Group disability insurance is often available through larger employers, but you can also buy your own private policy as an individual.

Key components of a disability insurance contract. There are a few important things to understand about any disability policy you consider:
•    Definition of disability. The highest level of coverage, called "own occupation" coverage, defines disability as not being able to work at the occupation in which you were engaged when you became disabled. At the other end of the scale, "any occupation" coverage defines disability as being unable to do any kind of work. Many policies fall somewhere in between.
•    Renewability. This concerns whether the insurance company can change your policy's terms over time. Most policies are either "non-cancelable" (your premium and benefits are locked in) or "guaranteed renewable" (your premium may increase).
•    Elimination period. This is how long you have to wait from the time you become disabled to the time you can start receiving benefits. The longer the elimination period, the less you'll pay in premiums. The most common elimination period is 90 days.
•    Benefit period. This is how long your benefits will last. Most policies will cover you until age 65, but some offer benefit periods of as little as two years.

Finding the best policy. Look for financially strong companies that will be around as long as you need to pay your benefits. (Ask any company you consider to provide you with its ratings.) Compare prices, but remember that you will usually get what you pay for, and the cheapest policy may not cover you when the chips are down.

THE BOTTOM LINE: While too often overlooked, anyone who needs their paycheck to pay bills should consider disability insurance. This is especially important for anyone who is the sole breadwinner in the family.

This column appears each week on CNNMoney.com, the Web sites for CNN and Money Magazine.

Syndicate this weekly column in your publication or Web site: http://www.armchairmillionaire.com/weeklycolumn

ArmchairMillionaire.com was founded in 1997. The company's first book, The Armchair Millionaire, was published in 2001. Today, www.ArmchairMillionaire.com is an established community of common sense savers and investors.

CONTACT INFORMATION:
Lewis Schiff
Armchair Millionaire
877-833-2823
http://www.armchairmillionaire.com/weeklycolumn



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