Posted on Sun, Nov. 01, 2009

When putting together a financial plan to ensure a secure future, many people think about investments for tomorrow and life insurance to protect their family if tomorrow doesn't come.

A piece of the puzzle missing is what's in between: What if a serious injury ends the ability to work and therefore reduces income?

Most people that find themselves in that situation have only Social Security to help them.

The government will pay a monthly benefit for workers who qualify for Social Security and are declared disabled by their doctor.

But this benefit is normally not enough to make up for a lost employment income, much like retirement checks from Social Security don't make up for wages.

The solution is to explore disability insurance, especially if it is not offered through an employer. And even if it is, if the employer is paying the premium, when it comes time for them to pay the benefit, it will be taxed as income. On the other hand, premiums paid by an individual for his or her own policy are not taxed.

Policies can be effective ways to replace just about a full paycheck. They are especially important for high earners, such as doctors and business owners, and workers who do not have enough assets built up or another family member that can support them and the newfound medical expenses.

Buying disability insurance is difficult for people who are healthy. But that's when to buy insurance. Like health insurance, once a condition creeps up it's either too late or more expensive to get coverage.

Disability insurance is not just about a physical condition. It also covers mental disabilities. In fact, psychiatric and emotional issues make up 12.7 percent of claims, according to the HIAA Source Book of Health Insurance Data, second only to back injuries.

That also means that those with diagnosed mental issues now may be ineligible for insurance.

When shopping for a policy, get several quotes from different companies to compare the benefits, coverage and premiums.

In the one second it takes you to read this sentence, one person became disabled in the United States, according to the National Safety Council, while in the four minutes it took you to read most of this article, only one person died of an injury.

That means that while all of us will die, the chance of being disabled is higher than dying this week. Yet more of us are likely to have life insurance than disability insurance.

Dan Serra is a financial planner with Strategic Financial Planning Inc. in Plano, Texas. E-mail him at serrafinance@yahoo.com.