NEW YORK (CNNfn) - Jim Bruning thought he was wasting his money on disability insurance until he broke his neck in 1979 in a swimming accident at his family's cottage on Lake Hickory in North Carolina.
As he glided over the lake on a rope swing that hot August day, he didn't realize the water level had dropped drastically to about four feet. He was left paralyzed and unable to use his hands -- and his career as a dentist was over.
"Like so many people, I didn't think I needed disability insurance," said Bruning, now 50. "I thought I was invincible."
One of the biggest misconceptions about insurance is that a healthy person doesn't need disability coverage, financial planners say. And if you make that dangerous assumption, you risk financial ruin.
A person under 40 is four times more likely to be disabled than die, according to insurance industry statistics. The problem is that about 90 percent of Americans have some type of life insurance, while only about 35 percent have disability coverage.
"The horror is how anyone would make it if they were unable to work because of a disability," said Jim Owen, executive vice president of Husic Capital Management, an investment management firm in San Francisco.
Diane Pearson, senior assistant financial planner at Legend Financial Advisors, a financial advisement firm in Pittsburgh, Pa., said disability insurance is crucial for people in the work force. She recommends policies for clients into their early 50s.
"That's one of the first things we jump on: to make sure a client has enough insurance," she said.
Many employers have some type of disability policy, but it's usually not enough to carry you through a crisis, said Brian Perlman, director of strategic research at the American Council of Life Insurance (ACLI), a Washington, D.C.-based group representing 593 insurers.
"Life is full of financial uncertainties, and having a disability is one of them," Perlman said. "Disability can have as catastrophic, or even more catastrophic, an impact as death."
Company disability policies vary widely -- and you'll be taxed at your regular income level on the money you receive, Perlman said. But with an individual policy, you can set the terms and the payments are tax-free.
On the other hand, company policies average around $200 a person, while individual policies cost much more.
The price tag for an individual policy will vary widely, depending on your age, health and income level. Owen said the cost could be several thousand dollars a year.
For example, a 35-year-old man in good health who earns $100,000 in a white-collar job would pay $1,282 a year for a disability policy at Portland, Maine-based Unum Corp., one of the nation's largest disability insurers.
"Disability insurance is not cheap," Owen said. "But you have to weigh your own situation: what would happen to your own personal lifestyle if tomorrow morning you could not work any more? What would you do? Unless you have a rich uncle, that is."
Owen advises clients to take advantage of corporate policies. Sometimes companies will pay the premiums, or match your contribution.
The ACLI said some states, such as New York, require companies to have short-term policies of up to 26 weeks. Other states, such as California, require 52 weeks. Short-term policies generally start after a person uses up sick time and last for six months to a year.
State law doesn't require companies to have long-term policies, but some larger employers offer coverage of at least five years. A typical policy would offer 60 percent of an employee's income starting when short-term benefits expire, the ACLI said.
You can also buy a policy that will supplement your company's plan, financial planners say.
"Disability insurance is something that every adult should look at," Owen said.
For Bruning, the North Carolina dentist, his disability policy has allowed him to support his wife and son over the past 19 years. He has a friend who broke her neck in a car accident who wasn't so lucky. She wound up living in public housing.
"It's hard enough to go through a disability," Bruning said. "But money is the straw that breaks the proverbial camel's back."
-- By staff writer Martine Costello
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