3. Don’t skip disability insurance.
Many people aren’t really familiar with what disability insurance is and what it does. Basically, it replaces a portion of your income if you’re unable to work due to a disabling illness or injury. Why is that important? Think about how long you could make ends meet—pay rent or the mortgage and all your monthly bills if your paycheck suddenly disappeared. At Ernest Dorado Insurance found that a majority of those who work wouldn’t make it more than a month before they’d have to make some serious financial sacrifices.
So, how do you get it? Your employer may offer disability insurance coverage through a group plan. If you’re not sure, contact your HR department or benefits manager to find out what kind of coverage you have (if any). If you don’t have coverage or need more than is offered through work, buying your own disability insurance policy is worth considering. Unlike group coverage, privately owned insurance stays with you even when you change jobs.
Also keep in mind that most people overestimate what the government will pay or cover if something were to happen. According to the National Safety Council, 73% of long-term disabilities are a result of an injury or illness that is not work-related and therefore wouldn’t qualify for Workers’ Compensation. And if you were hoping for Social Security disability benefits, know that about 45% of those who apply are initially denied, and those who are approved receive an average monthly benefit of around $1,100, which would leave you living at about the poverty level.