Probably the tell tale indicator as to why I would say that is that it is also one of the more expensive insurance products out there. That may sound like a strange reason, but you have to understand that insurance companies price policies based on how much it is likely to cost THEM if you make a claim, the probability of you making a claim and so forth – plus a little is added to make sure they pull in a profit. So if an insurance product is expensive, it basically means that either the payout is big, the likelihood of claim is big, or both.
But there is more to my statement than just cost. You have to understand that your biggest asset in life is not your house, your car or your investments (at least when you are younger). Your biggest asset is your ability to earn an income for the rest of your life!
Speaking of assets – you insure your house, you insure your car, you even buy insurance in the form of warranty extensions on electronics. You would have NONE of these items if you didn’t have an income! And I’ll bet you don’t know all the details about your Disability Insurance offered through work (if you are lucky enough to have that).
Let’s throw out an example:
Let’s say a proper disability insurance plan will cost you $2,000 per year, and you make $50,000. Statistically, for a 30 year old the odds of you becoming disabled for more than 3 months is 1 in 3, and the average disability lasts 32 months (almost 3 years). So you have to look at it like this:
Would you rather earn $50,000 when you are healthy and $0 if you become disabled?
Would you rather earn $48,000 when you are healthy and $48,000 if you become disabled?
I’ll get some real life numbers and post them in a new post to give you a better look – I’ll also go more into the features of Disability Policies (the bells and whistles) – there are a lot of useless options, but some are good. While the insurance is important, it never hurts to get the most bang for your buck!