There are Statistics, and then there are Statistics

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On Saturday, February 6, the New York Times had a great article about disability insurance. As a lawyer dedicated to helping people protect their families and businesses, the article shed light where there had been little in the past.

My experience is that disability planning tends to be neglected. Few do it, but nearly everyone should. In an earlier blog entry, I discussed one element of disability; setting aside cash equal to six months to two years of gross income. The New York Times article discusses disability insurance as a legitimate planning tool. The article points out that insurance companies and planners have been overstating the odds of being disabled. For years we have been hearing that a 25-year-old has an 80 percent chance of suffering a disability before age 65 that would result in being out of work for at least 90 days.

As it turns out, for a variety of reasons, this was not accurate. An analysis by the Disability Experience Committee of the Society of Actuaries shows that a 25-year-old actually has a 30 percent chance. Actuaries are high-power mathematicians trained to do these studies.

Personal factors can make your chance even less. White collar workers have less chance. If you have no chronic conditions, eat healthy, and avoid cigarettes, your odds may drop to 10 percent.

Even then, disability planning is important. You may get little or no disability pay from your employer. Social Security may not provide help. It can take more than a year for your claim to be processed. If you have to appeal, it will be much longer. Besides, Social Security disability payments may be too small to cover your needs.

If you are interested in more information on this subject, you can find the original article and additional details here.

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