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Financial Disasters: How to Prepare for a Disability

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18% of the American population is categorized as disabled. One disabling injury occurs every second in the United States and over 350,000 bankruptcies will be filed this year because the primary wage earner becomes disabled. 71% of American households live paycheck to paycheck making the financial margin slim should somebody become unable to work and 90% of all disabling events are not work related so believing that your desk job will keep you from becoming one of the 18% is ill advised.

With those statistics in mind, how do you prepare for a disability so that it doesn’t ruin your finances? 70% of all Americans don’t have the ability to meet short term debt obligations should a disability occur so taking time to address this financially dangerous issue is vital.

Debt

If a disability happens in your family, your preparations are what determines how well you financially deal with what’s ahead of you. We’ve all heard of the dangers of debt in our lives but we probably haven’t thought about the fact that we may someday be unable to produce an income to pay down the debt we owe. Always living within your means is the best way to deal with unknown future events.

Insurance

More than 100 million people have no form of disability insurance. This type of insurance pays you all or a portion of your monthly wage while you are disabled. If you’re one of the 70% of American households who can’t afford not to have a paycheck, it is vital that you have disability insurance. There are a variety of different plans available and premiums vary widely so get at least three different quotes.

Long term disability coverage protects you from indefinite periods of time where you are unable to work. This may take the place of Social Security benefits and in the case of a non-cancellable policy, the policy can’t be terminated or the premium increased providing you pay your premium on time every month.

Short term policies cover temporary loss of wages that may result from injuries or illness that aren’t expected to permanently disable you. Because Social Security benefits often take an extended amount of time to be approved, short term disability can fill the gap between the incident and the approval of Social Security benefits. With the average SSI benefit at slightly more than $1,000 per month, short term disability insurance can also pay for what SSI does not.

Understand Workers Compensation

If you are injured on the job, you may be entitled to workers compensation benefits. Often, this first involves seeing a company approved doctor to evaluate the illness or injury and then setting up a treatment plan that will get you pack to work as quickly as possible. An employer may also elect to give you light duty work during your disability while still paying you your normal salary to avoid having to pay workers compensation.

Nobody want to think that they’ll become sick or injured but the best way to prepare for it is to protect yourself while you’re healthy. Carefully mange your debt, consider disability insurance, and understand your work place rights with workers compensation and Social Security.

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