Five Myths About Income Protection – Debunked

A simple yes or no question:  If you could set aside a small portion of your current income to protect millions in future income, would you? If you’re like most people, the answer is, “yes!” Now, another question:  If you could get disability insurance to protect millions in future income, would you? If you’re like most people, now you’re not so sure. The second we hear “disability insurance,” we tend to think, “It won’t happen to me” and the topic is closed. Myths like that are everywhere and get in the way of making progress toward financial security. I think it’s time to set the record straight.

Myth #1 – The infamous, “It won’t happen to me. I expect to stay healthy.”

It’s a nice thought, but optimism is not a financial strategy.  One out of every 4 workers will become too sick or hurt to work before they retire.1 What are the causes of those disabilities? Most people think it’s accidents.  The fact is, most are caused by illnesses (e.g., back pain, cancer, arthritis).

Myth #2 – “It’s too expensive.”

Most of us tend to overestimate the cost. The actual yearly cost is just 1 to 3% of your income. On a daily basis, that’s about what you’d spend on a latte each day (except your latte won’t help replace potentially millions in income).

Myth #3 – “The government has me covered.”

Your chances of getting approved for Social Security disability benefits are slim, and getting slimmer as the U.S. faces solvency issues with the fund.  Nearly 6 of 10 people who apply for Social Security disability benefits are declined. 2

Myth #4 –“I’ll buy it later.”

Sure, you can wait. But, just like saving for retirement, the sooner you take action, the better.  The best time to get coverage is now.  Since we don’t get healthier as we get older, the longer we wait, the more costly coverage becomes.  And, if your health changes significantly, you may no longer qualify for a policy.

Myth #5 – “I can rely on my savings and retirement.”

If you have enough money to get through the loss of income for an extended period of time, congratulations – you’re in an exclusive club!   Most of us, however, can’t afford to deplete our savings or retirement accounts.  (This strategy merely takes future income to pay for current needs.)

Now that those myths are cleared up, I’d like to end with one more question: What other myths or concerns do you have about protecting your income? I’d love to help set the record straight.

 Social Security Administration, Fact Sheet, April 2014.

2  Social Security Administration, Annual Statistical Report on the Social Security Disability Insurance Program, 2013.

Paul Fromm, Vice President of Individual Disability Insurance, the Principal Financial Group

Dentists Disability Insurance

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