“My health insurance will pay for my disability”
I have heard this response from prospective clients many times before we start working together. It is not uncommon for people to confuse the benefits offered by health insurance and disability insurance and long-term care insurance. When learning about an individual or a family, one of the pieces of fact-finding information we discuss is the amount and type of disability insurance they receive through work, and how much they have through a policy they have personally purchased. Quite often many are opposed to purchasing disability insurance personally and believe what they have through their job is adequate.
Interestingly, many of these individuals are willing to purchase life insurance before they are willing to purchase disability insurance. When I learn that they’re under the impression that their health insurance will pay a portion of their salary in the event they’re out of work, I am alerted that they may not understand the intricacies of how these insurances work.
The financial planning industry is filled with many different vehicles that can help one accumulate wealth, and similarly help to protect it. While we work and earn a salary to pay for our lifestyle and to save for the future, we need to be mindful of what we should do to protect ourselves should we get sick or hurt and are unable to earn an income. Most employers provide health insurance coverage to their employees so that when they are not feeling well, they can go to the doctor to get checked, and, if necessary, be prescribed medicine to get better.
Quite often one may have to pay a co-pay for the visit and for part of the cost of the medicine depending on the health insurance plan one has. The health insurance coverage indemnifies the insured against the total cost of the doctor’s visit and medication. If we didn’t have health insurance, we would be saddled with the total cost for the doctor’s visit and medicine which in some cases could be exorbitant.
We have insurance for a variety of reasons. The common denominator is to protect the things we cannot afford to lose. Whether it be our health, wealth, or the ability for our loved ones to sustain a specific lifestyle when a provider passes away. Each type of protection is provided by a specific type of insurance. We buy life insurance to protect our families if the primary provider passes away. Health insurance protects us when we get sick or even worse, end up in the hospital. Disability insurance is used to protect our biggest asset – our ability to earn a living. Imagine if something happened, and you couldn’t work. Your bills wouldn’t go away.
Although employers usually provide some sort of generic disability coverage, it may not be enough to sustain a moderate lifestyle. Similar to getting a health and wellness check-up one should also evaluate their personal disability insurance coverage to ensure that it is in line with what they would need should they ever have to file a claim.
Frequently my clients assume that you have to be at home indefinitely to benefit from disability insurance. But that’s not the case. Whether it is not being able to work 100% of the time or still being able to work part-time, but perhaps not in your current occupation as a result of the disability, this sort of insurance may still provide income to sustain a moderate cash flow.
It’s easy to understand how many might assume that health insurance and disability insurance are the same thing. The best analogy I can give is that health insurance will pay the doctors, hospital, and a pharmacist to care for you. Disability insurance, on the other hand, pays you providing a flow of funds into your bank account so that you can maintain a moderate lifestyle until you are able to go back to work again.
Insurance products are subject to eligibility requirements and restrictions.
Registered representative of and securities offered through Hornor, Townsend & Kent, Inc. (HTK), Registered Investment Advisor, member FINRA/SIPC, 600 Dresher Road, Horsham, PA 19044, (215) 957-7300. HTK does not accept time-sensitive or action-oriented messages delivered via e-mail, including authorization to “buy” or “sell” a security or instructions to conduct any other financial transaction. 2360941PH_Feb21