Like many others, I like to think of myself as financially responsible and knowledgeable. Part of which means having an Emergency Fund (EF). What’s interesting though is that many financial experts can’t seem to agree on how much that EF should be.
Now I used to hear that this EF should equal about three months of living expenses, which is what I did. Now this number may be accurate based on a wide range of assumptions. These are assuming that one or more of these will kick in once a claim is submitted:
Short/Long Term disability through an employers group benefit plan
Disability insurance on loans, mortgage, lines of credit, etc.
Income replacement in a person’s auto insurance
Private individual insurance
We often forget that all claims submitted to whichever coverage plan, are all subject to approval. You may assume approval due to the various documents that you submit. Yet, all coverage plans will act as judge and jury on submitted claims.
If your claim is rejected, you can submit an appeal. However, many plans have very lengthy appeals processes and the appeal will likely be rejected. The reason being is that the appeal will likely be viewed by the same people who rejected the claim in the first place. I also learned that some plans will only let you appeal a maximum number of times. If you’re appealing a Workers Compensation decision, some of those appeals have been known to drag out for years!!!!!!!!
There are far too many horror stories out there where people have been financially ruined because of their legitimate claims being rejected. In many cases these stories include broken families, violence and paths of Self-Destruction.
It didn’t take me very long to learn that my EF was rapidly going to run out after I badly injured my back. I was fast becoming one of those horror stories. I had to endure over 18 months with no regular income. This was followed by another 12 months with only about 50% of my disability income. Not only did I have one hell of a time trying to make ends meet, my expenses significantly increased. These included numerous medical forms to be filled out, faxing reports to the insurance companies, trying to get treatments and much more.
You may have heard of the term, “Pay yourself first” which usually means putting aside a certain percentage of your income aside for retirement. I want to add another sentence for your vocabulary, “Protect myself first”. The reason being is that if you have no regular income, you won’t be able to put any kind of money away for retirement anyway. Furthermore, you may end up using whatever you have set aside for retirement in order to live.
As already mentioned, if you end up having a condition where you need treatments in order to recover so that you can return to work (like I did), who’s going to pay for those treatments if your claim(s) is rejected? In my case, even one of the Compensation Board’s own doctor’s indicated that I needed specific treatments for my back injury and over half of those recommended treatments were rejected.
When I spoke with an official that deals with worker’s compensation board appeals, he shared with me a very scary number. He indicated that the worker’s compensation boards (for example) know that only about 20% of the claim rejections are ever appealed. This means that it’s within their vested interest to issue numerous denials, regardless of what documentation is submitted.
When it comes to private insurance companies, there’s the option of pursuing legal action, which could also take years. In fact there are law firms that all they specialize in is disability claim denial cases. Depending on the jurisdiction, it’s rare that a person will ever come out ahead financially if their claims were rejected. Don’t become a statistic and one of the countless horror stories. Whatever you set aside each month for retirement, you need to set an equal amount into an EF.
“PROTECT MYSELF FIRST”
Until next time, stay safe, healthy and strong.
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