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Health & Fitness

Protecting Your Paycheck In Tough Economic Times

The loss of the ability to work can be more devastating than the loss of a job. Learn how you can protect yourself and your family from losing your ability to earn a paycheck.

If you were unable to work at your current job, would your family be able to live in a manner that they are used to? Could you keep up on your mortgage payments?  Would the fridge be full when the kids are hungry? A tough economy and job market makes protecting your income more important than ever. 

There are a number of different ways to maintain your job security, but what happens when the unforeseen occurs? Know anyone that has been laid off recently? How about someone who has been temporarily or permanently disabled and no longer able to work? This is the time to check your "it won't happen to me" attitude at the door—this is real life, and it doesn't play favorites.

According to the U.S. Social Security Administration, one in four of today's 20-year-olds will be disabled and unable to work at some point in their life. Some of these disabilities will be temporary, others permanent. We'd better start by defining a disability first. 

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A disability is... Basically any health-related issue that causes you not to be able to complete the general day-to-day tasks of your job. This can range from carpal tunnel to paralysis, chronic back problems to diseases/illnesses.

Many insurance and financial products companies offer Disability Income (DI) policies to help consumers collect at least a portion of their paycheck in the event they can't physically go to work. Many people only have disability coverage through their employment benefits package. If you rely on your employer to provide your disability coverage, I encourage you to review the details of that coverage to make sure it is adequate. This is real money we're talking about!

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Here are some things about disability policies you need to know.

-The most popular forms of disability coverage are 1) mortgage disability, and 2) disability income.

1) Mortgage disability pays your monthly mortgage payment for a certain amount of time if you are disabled and cannot work. Typically less expensive than a disability income policy.

2) Disability income pays a portion of your salary (typically around 60-70 percent) if you are disabled and cannot work.

-All disability policies include an elimination period. Think of this as your deductible. Common elimination periods are 30, 60 or 90 days. In order for your disability policy to start paying, the number of days you are unable to work must exceed your elimination period. Example: Your elimination period is 30 days. You have back surgery and are unable to work for four months. Once the first 30 days has passed, your policy pays the benefit pro-rated back to day one of your disability.

- All disability policies have a certain benefit period. Common options for these are one year, five years, and until age 67 (social security takes over at age 67). The benefit period you select should reflect how long you would like to receive your benefit payments. Let's say you select a five-year benefit period and are paralyzed in a car accident. Although you are permanently disabled, your disability policy will only pay out for five years.

-Many consumers purchase their own disability income or mortgage disability policy as a supplement to their employment benefit package's coverage. 

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