Thought Leadership on Accounting and Finance presented by CliftonLarsonAllen.
Achieving your financial goals can rely on a number of factors. One of the most important may be your current and future income. Many people take their income for granted by assuming that it will continue as long as they need it.
But imagine what would happen if your paycheck didn’t show up one week. What if you were without your income stream for several weeks, months or even years? Your goals and aspirations for the future may have to be put on hold or changed dramatically to address your unexpected circumstances.
Many strategies and investments will play a role in a goals-based financial plan. Income protection is the foundation and should be a priority.
Your income: the most important asset in your portfolio
In a 2014 survey conducted by the Council for Disability Awareness (CDA), 67 percent of respondents said that their income is one of their highest priorities (right up there with health and home). However, only 28 percent said they believe it’s crucial to have insurance to protect it. So if your income is the source of your financial well-being, why wouldn’t you protect it, just like you do your home, your car and your life?
Two of the most common objections that people express: “Nothing will happen to me that will keep me from working” and “Insurance costs too much.” But the numbers say otherwise.
Disabilities are more common than you might think
Here are some statistics from the Social Security Administration that seem to conflict with common perceptions about the inability to work:
- More than one in four of today’s 20-year-olds will become disabled before they retire.
- 8.8 million disabled wage earners — more than 5 percent of U.S. workers — were receiving Social Security Disability Insurance (SSDI) program benefits at the end of 2012.
- In December 2012, there were more than 2.5 million disabled workers in their 20s, 30s, and 40s receiving SSDI benefits.
In addition, the U.S. Census Bureau reports that more than 37 million Americans are classified as disabled, which is about 12 percent of the total population. More than 50 percent of disabled Americans are in their working years, between ages 18 and 64.
Disability does not play favorites
Are you at risk of a disability if you’re working in a comfortable chair behind a desk in a temperature-controlled office? From the perspective of most insurance companies, you are. Most policies define disability as: “The inability to perform the substantial and material duties of your occupation.” This brings on-the-job accidents and injuries to mind, but in fact, accidents are not the primary cause of disabilities. As a 2014 CDA study indicates, approximately 90 percent of disabilities are caused by illnesses rather than accidents.
So the question you should ask yourself is not “What if I become disabled?’’ You should ask “What if I become too sick or hurt to continue working?” Musculoskeletal disorders are the number one disabler in this country. Examples include arthritis, back pain, and spine and joint disorders. The other major causes are cancer, diabetes, heart disease, and nervous system-related disorders.
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