Protecting Income for Single Moms (and Dads)

According to the Life Insurance Marketing and Research Association (LIMRA), 54% of all people in the U.S. are covered by life insurance. Compare that to LIMRA’s estimate that only 14% have disability coverage other than the basic benefits available through Social Security.

The sad truth is that Americans are better prepared financially to die than to become disabled, despite sobering facts like these:

• Each year, 6% of working Americans will suffer a short-term disability (up to six months) due to illness, injury, or pregnancy. Most disabling conditions are unrelated to work and are not eligible for workers’ compensation.
• Nearly one-fourth of today’s 22-year-olds can expect to be off work for a year or longer due to a disabling condition before they reach retirement age.
• An estimated 43% of 40-year-olds will experience a long-term disability (more than six months) before turning 65.
• As of May 2022, roughly 150 million adults – 58% of Americans – live paycheck to paycheck. High earners are not spared – an estimated 30% of those earning $250,000 or more and 36% of those earning $100,000 or more are in the paycheck-to-paycheck group.
• Only 40% of households have enough liquid savings to cover three months of recurring expenses, and only 28% can cover six months.
• Three out of 10 American adults say would not be able to pay an unexpected expense of $400 without using credit or borrowing money from friends or family.
• An average of 65% of Social Security disability applications are denied the first time. Even after an appeal hearing, 35% of claims get rejected again, and 20% are dismissed.
• Even if your Social Security disability claim is approved (which can take months, especially if you are initially denied), your benefits will not start until at least the sixth month after your disability began.

If you are a single mom or dad, you’re not just the primary wage earner; you’re the only wage earner. What would happen if you had to be off work and without income for a few months, let alone longer? The risks are higher than you think.

Protecting Income with Individual Disability Insurance

Disability insurance is designed to replace part of your regular income if you become disabled. That’s why it’s often referred to as “paycheck protection” insurance. The typical disability policy replaces roughly 80% of your net income for a specified period.

Many people obtain their disability insurance through their employer, paying for it by payroll deduction. These group policies typically pay 60% or less of your income and a cap of perhaps $5,000 a month (your employer’s policy may vary). This may not be enough on its own, particularly if you are in a high-earning category.

Those who do not have disability insurance through their employer or who want to supplement that base level income protection with additional coverage, can purchase an individual disability policy.

One advantage of having a private individual disability insurance policy is portability. If you leave your job and all you have is an employer plan, you lose your coverage. However, if you have an individual plan, it goes with you regardless of where you work.

Another advantage of an individual policy is that you can customize your coverage to your specific needs. A group plan has to treat everyone the same, but with an individual plan, you can customize your coverage features to specify:

• The income percentage that the policy pays
• How long the benefit payments continue
• How quickly the benefits start (waiting period)
• The definition of disability
• Renewal provisions (guaranteed renewable, etc.)
• Riders

Disability Insurance Cost

Premiums for disability insurance are based on various factors, including age, occupation, gross income, percentage of income covered, and how long the policy can pay out.

That said, on average, the annual premium for a long-term disability income insurance plan costs between 1-3% of your gross yearly income. In other words, if you earn $80,000 a year, you can protect your paycheck for as little as $67 a month!

For more information on Individual Disability Insurance, request a quote.