Your income is the foundation of your financial strategies and your capacity to earn income into the future is one of your largest assets. How would the loss of your paycheck - or one paycheck in the family - due to injury or illness affect your lifestyle?
Did you know that the #1 reason for home foreclosure is disability? Disability is the reason for home foreclosure 16x more than death according to the U.S. Home and Housing Finance Agency.
Did you know that 1 in 4 Bankruptcies are due to disability according to Norton's Bankruptcy Advisor?
Did you know that disability due to illness accounts for more than 86% as compared to physical injuries at 14%?
During a meeting with a Financial Planner, I learned some important details about Disability Insurance of which I was completely unaware:
- The typical Disability Insurance provided by employers covers 60% - 66% of base salary - excluding bonus and commissions.
- Employer-paid Disability Insurance is taxable, therefore, even if you are paid entirely by salary covered by disability insurance, you will face a 30%-44% reduction in net income.
The final item that I learned is the significant difference between an "own-occupation" and "any occupation" policy. In general:
- An "own occupation" policy pays disability income if you cannot return to your own occupation.
- An "any occupation" policy pays disability income only if you cannot return to any occupation.
We insure what we cannot afford to lose: health and home, cars and personal property, but we rarely consider insuring our most important personal asset - our ability to generate income.
If the loss of income would put your home ownership at risk, it could be important to consider the cost of disability insurance when planning a home purchase.
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4 comments:
Excellent article, Wendy and one that each of us should pay close attention to...never know when any of us could fall prey to illness.
Very informative for the reader. Thanks.
Fantastic Information Wendy! It's no wonder you are the premier Lender of choice all over the Bay Area. I can't wait to read more of your articles here. I am a big fan of your Blog and website. Thank You!
These statistics are not taking into account the current market conditions of: higher adjusting rates coupled with declining equity, that has led to record foreclosure rates in California.
California Mortgage Loan
I rarely hear a mortgage planner talk about the types of disability available. Excellent job.
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