30 Day Financial Transition Challenge Day 22: Disability Insurance

Welcome to Day Twenty-Two of the “30 Day Financial Transition Challenge.”  Today’s article focuses on disability insurance.

Bottom Line Up Front (BLUF) 

As you exit the military, it’s important to look at protecting your post-military income, especially from death and disability.  While we covered life insurance in Day 17, it’s just as important to look at your income risk from a disability perspective.

Why? 

When you exit the military, your paycheck depends on your ability to work for your employer.  While some employers offer disability insurance, not all of them do.  In today’s society, if you’re injured or suffer an illness that limits your ability to work, you might still be able to find work.  However, if you’re not prepared for the possible financial impact associated with a long term illness or injury, your livelihood could be at risk.

Most people don’t regard disability insurance as something that is important.  However, if your trade skills are highly dependent on your ability to perform specialized task or manual labor, you need to be very mindful of what could happen if you’re no longer able to perform that work.  Today’s the day for you to determine whether disability insurance (employer-provided or self-funded) should play a role in protecting your post-military income.

Goal

Today’s goal is to establish a plan that ensures:

  • You understand what would happen in the event of permanent disability
  • What options you have
    • Through your employer
    • On your own
  • How to obtain disability insurance, if you feel you need it

What you need

Nothing

How-to

This exercise consists of a simple checklist of questions to help frame your approach.

  1. What would happen if you were permanently disabled?  
  • If you could live your current (or desired) lifestyle with no change, you might not need insurance (i.e. permanent retirement)
  • Would you be able to afford the increased costs of care (nursing care, equipment, physical therapy, etc.) as well as maintain your quality of life?
  1. If you were to realize an impact, can you quantify it? 
  • If you couldn’t maintain your lifestyle, what expenses would you be able to cut?
  • What expenses would you NOT be able to cut?
  1. Disability insurance availability? 
  • Employer? If available, usually in a group insurance form.  Ask your employer’s HR.
  • Self-funded?
  1. Disability insurance options?
  • Disability insurance can be very complex. Are you going to research this on your own or hire a financial planner?
  • Premium costs: depend on a variety of factors
    •                Definition of occupation
    •                Type of occupation
    •                Elimination period
    •                Duration
    •                Amount of coverage
  • If you’re in a high-risk (such as construction) or a specialized line of work (such as a surgeon), you might want to consider hiring a financial planner to help you determine whether disability insurance is right for you, and to help you select the right type of policy.

Conclusion

No one ever needs disability insurance until they face the prospect of never being able to work again, or being limited in their ability to earn an income.  What would happen if your primary breadwinner wasn’t able to work again?  If you don’t know the answer to this question, today’s focus item is particularly important.

Tomorrow, we’ll discuss PCS moves.  Even if you don’t plan for a final military move, you will want to make sure that you understand what you’re entitled to.  That way, if you end up having to relocate unexpectedly, that move complements the rest of your post-military plans.

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About Forrest Baumhover

I'm a career naval officer, and a fee-only financial planner. Half-way through my career, I discovered that I had a passion for financial planning, and have pursued this as my second career. My specialty is working with military professionals who are looking to separate or retire from the service, and who feel they need some professional guidance to make sure they're on track.
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One Response to 30 Day Financial Transition Challenge Day 22: Disability Insurance

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