The COVID-19 outbreak has disrupted much of daily life since entering the U.S. For those who contract COVID-19, the impact gets even more serious. In addition to the physical toll, the virus can lead to serious financial concerns as well. Read on for tips on protecting your finances during this tough time.
It’s impossible to escape the daily headlines. More cases reported and lives lost. Businesses and schools closed. Markets in disarray and record unemployment.
The COVID-19 outbreak has disrupted much of daily life in the US. Much of that disruption is caused by people's reaction to the virus and the measures taken to minimize it. But for those who contract COVID-19, the impact is far more serious. In addition to the physical toll, the virus can lead to serious financial concerns.
Anybody who contracts the novel coronavirus needs to remain quarantined until they no longer carry it. Milder cases of COVID-19 typically take two weeks to recover from, while severe cases could be anywhere from three to six weeks. Even then, a greater risk of serious long-term health issues persists.
Hopefully, you won’t experience the illness. But if it were to happen, here are three financial considerations you should take into account now to prepare in case a COVID-19 diagnosis prevents you from working.
How much paid sick leave do you have?
Many workers are able to stay home and take time off to recover from COVID-19 by using paid sick leave offered by their employers. But not everyone is so fortunate.
Prior to the COVID-19 outbreak, the U.S. Bureau of Labor Statistics reported more than 32 million workers did not have paid sick leave. Currently, there is no federal law that requires companies to offer paid time off for illness.
This prompted Congress to pass the Families First Coronavirus Response Act (FFCRA) on March 18th, which guarantees two weeks of paid sick leave up to $511 a day to those who are subject to quarantine, experiencing COVID-19 symptoms and seeking a medical diagnosis, or caring for a quarantined family member. The bill also includes 12 weeks of emergency child care leave, with 10 of those weeks being paid.
While the FFCRA was certainly a step in the right direction, it may not have been enough. The Center for American Progress reports that the FFCRA excludes up to 106 million American workers from receiving guaranteed COVID-19-related emergency paid leave. Emergency responders, healthcare workers, and employees of businesses with less than 50 workers are some notable exemptions.
Those who fall in this category could face severe financial distress, especially if they don’t have adequate savings to fall back on. Even those who are eligible to receive paid sick leave are only getting short-term financial relief for a few weeks.
What about your emergency fund?
If paid sick leave runs out and you still have not fully recovered, you may need to tap into your emergency fund.
An emergency fund is savings that you set aside to help you through unexpected events with a negative financial impact. Having an emergency fund can improve your financial security and minimize the stress of a job loss, disability, or a major repair.
An emergency fund can protect you from having to use credit cards, take out loans, borrow from your retirement account, or ask friends or family for help.
Without an emergency fund, you may live in fear of crisis. And if an adverse event occurs, like contracting coronavirus or having your job impacted by the pandemic, an emergency fund can protect you from having to use credit cards, take out loans, borrow from your retirement account, or ask friends or family for help.
Financial experts suggest your emergency fund should hold an amount equivalent to at least three months of take-home pay. Another rule of thumb is to have enough to cover essential expenses for three to six months in the event you have no income.
However, saving for an emergency fund of this size is not always realistic. According to a recent study by GOBankingRates, 48 percent of Americans reported that they do not have enough emergency savings to last them longer than three weeks.
For some, the good news is that adequate paid sick leave benefits and an ample emergency fund should be enough to make it through if you become ill. For many, the bad news is they do not have access to these financial resources at all.
Have you considered disability insurance?
Patients who overcome severe cases of COVID-19 are at a higher risk for future health issues, especially after developing acute respiratory distress syndrome (ARDS). Similarly, those requiring intensive care are at a greater risk for mental health issues as well.
This makes long term disability insurance a smart investment as your next line of financial defense.
Disability insurance covers the potential loss of income caused by injury or illness. If you are unable to work because of a covered disability, the policy will replace part of your income. You will receive these benefits for as long as you’re disabled or up to a maximum period of time spelled out in the policy.
Disability insurance covers the potential loss of income caused by injury or illness. If you are unable to work because of a covered disability, the policy will replace part of your income.
How long you have to wait for your benefits to kick in depends on the length of the waiting period you select on your policy. Long term disability insurance waiting periods typically range from 30 days to 180 days. This means you could get by on paid sick leave and emergency savings in the short-term, then rely on your disability insurance benefits if long term health issues arise.
The need to protect your income with disability insurance isn’t new. Prior to the COVID-19 pandemic, the Social Security Administration estimated that one in four of today’s 20-year-olds will experience a disabling event before retirement age. Roughly 90 percent of long term disabilities can be attributed to illnesses, including infectious diseases such as COVID-19.
Be proactive about protecting your income
If you do not have paid sick leave or an emergency fund, then you absolutely should have long term disability insurance to minimize the financial impact of coronavirus. Even if you do have these resources, consider disability insurance to protect your income against long term health issues stemming from COVID-19.
No matter what your situation is, it’s important to be proactive now rather than reactive when it’s too late. At Breeze, you can get an online disability insurance quote to check your rates. It’s quick, free, and personalized. If you like what you see, you can apply for coverage online in about 15 minutes.
Having disability insurance means being able to buy food, pay bills, and cover household expenses while you’re unable to work. It can provide financial peace of mind in uncertain times.