What is disability insurance?
Disability insurance can be purchased to cover lost wages in the event of illness, injury or accident. It’s portable and not linked to an employer so the coverage stays with you regardless of life or career changes. The coverage you purchase typically pays lost income until age 65, 67 or 70, but the time periods do vary depending on the policy.
What are the contributing factors that determine the cost?
Disability insurance premium is determined by your occupation, income, age and health. It is best to purchase disability insurance sooner than later as there are benefits such as riders to increase coverage in the future (as income increases) without a medical exam or potential exclusions.
What are the stipulations or requirements to get disability insurance?
The main prerequisite is that you must be employed. You are purchasing coverage for lost wages so there has to be initial income that would be threatened or lost by disability.
What forms of disability insurance are there?
Two of the most common definitions of disability insurance that you can purchase are the “Any Occupation” and “Own Occupation”. “Any Occupation” policies define disability as the inability to perform the duties of any occupation. For benefits on this type of policy, you would have to be unable to work in any occupation, not just your current one. “Own Occupation” is more common and covers individuals who are unable to perform the majority of job duties they’ve been trained to do in their current position or field.
Can I get disability on the group plan my employer offers?
Some businesses do offer disability coverage on their group health insurance plan but there are usually more limitations, such as only 60% of lost wages covered and generally, it’s taxable. Employer-provided disability is also offset by social security, unlike individual coverage. Most employer-provided disability plans also do not carry the Cost of Living Adjustment (COLA) protection and the definition of “disabled” can be different.
Disability insurance is often times overlooked and considered to not be a necessity by consumers. However, it’s extremely important and helpful if you are unable to earn income. Statistics have shown claims to be significantly higher on disability than regular life insurance during your working years. Everyone’s situation is different and disability insurance varies based on your specific occupation, age and health. We are happy to review options with you to ensure you are covered for what you may need.
How much would disability insurance pay?
In the event of injury or illness causing the inability to work, disability insurance will pay a portion of your lost income to help you adjust financially. The payable amount varies by policy and carrier but is typically around 60% of your income or 75% if your take-home pay. If your annual salary is $100,000 and you are out of work, you could be compensated approximately $5,000/month from your disability policy. Again, this percentage may vary but it is determined at the time of application when financial verification, such as pay stubs and tax returns, are submitted.
Do I need disability insurance if my employer provides it?
Most people are unaware that their employer provided disability insurance plan often has limitations.