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Ask Dave

Not Eligible For Disability Insurance?

A listener asks what options they have if their profession is not insurable for disability.

QUESTION: A listener asks what options they have if their profession is not insurable for disability. Dave lists some possibilities. He then talks for a few minutes about the importance of long-term disability insurance.

ANSWER: Usually—in a really tough insurance market, meaning that you’re like a high-rise window washer or something and it’s tough to get life insurance or disability insurance—a trade association of some kind or an employer will gather the people together and enable you to make a market. It’s very difficult the more you use your hands or your body in the execution of your job—the more blue-collar the job is, the tougher it is to get disability in a standalone situation.

Think about how hard it would be for a fireman to get disability insurance for goodness sake. They’re heroes every day. They put their lives at risk, right? And that’s a very difficult thing, but they obviously can get disability and/or are furnished disability through their municipality that they work for. That’s an example of an extreme situation even.

If you are just on your own and you do a job as a standalone small-business person and you do a job that puts you at high risk, you may not be able to get it. You just may be stuck. Or if you did get it, it might be cost-prohibitive.

I will tell you this: Long-term disability insurance is one of the most important insurances you can buy. It’s one of the most underinsured areas in the average person’s financial plan.

Let me give you an example. If you’re 30 years old, you’re 12 times more likely to become disabled than you are to die—12 times—and yet most everybody carries some kind of life insurance, or at least knows they need to, but they completely ignore long-term disability insurance. Honestly, long-term disability early in my career scared me more financially than death, because if I die, millions of dollars are going to my spouse, right? It’s easy to buy term insurance when you’re 30 years old—lots of it. It’s not that expensive. But if you become disabled, you can only get a certain amount—usually around 70% and in some situations only 50%—of your income as a long-term disability, and it generally doesn’t go up much where throughout the scope of your life, your income would’ve gone up, so you really do get stuck in those situations.