What Does Disability Insurance Cover
Disability insurance covers injuries and illnesses that limit your ability to do whatâs expected of you at work. Seems pretty straightforward, right? Well, there are still many misconceptions about what is considered a disability and what isnât.
For example, what comes to mind when you hear the word “disability”? Often times its freak accidents and rare birth defects. All of those unlikely, tragic events that we believe just can’t happen to us.
But this simply isnât the reality.
More than 25 percent of today’s 20-year-olds will experience a disabling event that prevents them from working for at least three months before retirement. And when you consider the most common causes of long term disabilities, itâs really not all surprising. Take a look for yourself here:
- Heart disease
Yes, you read that right. The Council for Disability Awareness reports that 90% of claims filed for long term disability benefits stem from medical illnesses, not physical injuries.
To be clear, this doesnât mean injuries such as fractures, sprains, and strains of muscles and ligaments are not disabling. What it does mean though is that the scope of disabilities that can prevent you from earning an income is a lot broader than most people realize.
Is Disability Insurance Worth It
As you weigh your options, consider what you would do if you couldnât work for an extended period.
- What if you endure a temporary or permanent disability at some point in your working life?
- How long could you go without a paycheck before experiencing financial hardship?
- Does your group plan provide enough coverage to maintain your current lifestyle?
- Could you get by on government disability benefits? If youâre actually approved, that is.
Of course, thereâs no way to answer any of these questions for certain. But you can prepare for the worst by putting a disability insurance plan in place today.
Better to be proactive now than reactive when it’s too late.
Jack Wolstenholm is the head of content at Breeze.
The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.
What Are The Odds Of Being Disabled
Being disabled is a life-changing event. You may face steep medical costs, even with health insurance, and ongoing costs of rehabilitation and care. This can quickly exhaust even significant personal savings, and make it hard to manage daily expenses.
Then, you have to consider the fact that youre going to be out of work. Your steady salary may no longer be accessible to you, and you may not be able to find a job that you can do quickly or easily. That means youll have zero income and mounting expenses-which makes disability insurance all but a practical necessity if and when you become disabled.
Nobody can predict being disabled, so the question then becomes, what are your odds of becoming disabled?
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How Much Does Long
You can receive up to 60% of your gross monthly income while you’re disabled. The benefit period, or how long you receive payments, can last for two, five, or 10 years, or until retirement. Like other policy features, the higher your benefit payments and the longer your benefit period, the higher your premiums will be.
How Do I Get Approved For Long
As part of your disability benefits application, your doctor will submit a statement on their opinion of your condition, as well as applicable clinic notes, lab results, surgical reports, X-rays, or MRI findings. Then, the insurance company will review your claim and current status. If youre approved, theyll start paying out as soon as the elimination period is over.;
One important note: to show that your disability is truly ongoing, youll need to continue receiving treatment for your disability while your claim is pending and after receiving benefits. Otherwise, the insurance company may cut you off. ;
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What Is Disability Insurance
In general, disability insurance covers some of your income if something happens to you and you cant work.;
The younger and healthier you are, the easier it is to qualify for a policy. But as you age, premiums increase. And if your health goes south, you may find it hard to qualify for an affordable policy at all.;
But disability insurance doesnt just cover freak accidents. Most claims are for things you may not realize are considered disabilities, like physical injuries, a heart attack, or cancer. These things could happen to anyone in any workplace.;
What To Keep In Mind While Looking For Long
When looking into various long-term disability insurance plans, there are several things you’ll want to keep in mind.
The first is to be sure that you are eligible for the plan and meet all of its requirements. Next, you will want to know the premium rates of the plan and whether or not you can afford it.
You’ll also want to know what the waiting period is. This is the period of time you’ll need to wait between requesting your insurance and receiving it . It’s important to remember that shorter waiting periods typically come with higher premiums. Finally, you’ll want to know the exact percentage of income coverage you will be receiving.
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How To Find Coverage
As always, the best time to get disability insurance is right now.
Not only will you be prepared if a serious injury or illness is right around the corner, but youll also pay lower premiums when youre younger. In fact, if you act soon enough, some companies will charge as little as $9 a month.
Nowadays, its trivial to apply. A number of great providers will let you skip the medical exam entirely and apply online in minutes. You can find policies to match every income and every type of household.
Once youre done, youll be protected no matter which way the dice fall. Thats peace of mind worth paying for.
Get a Disability Insurance Quote
If Youre The Sole Breadwinner
Being the only person in your household who earns a paycheck makes protecting that income a necessity. Thats especially true for single parents, since a partner going back to work isnt an option. If you were to come down with a critical illness or experience a debilitating injury, you want to ensure you and your family are covered by your individual disability insurance. If your loved ones rely on you as the sole means of support, you might want to move disability insurance near the top of your financial planning to-do list.
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How Much Does It Cost
Obviously, the cost of your disability insurance policy will vary significantly based on how comprehensive the policy is, whos helping to pay for it, and your personal risk factors. For example, as you might expect, younger populations tend to pay lower premiums than older populations, and workers in high-risk occupations tend to pay higher premiums than workers in low-risk occupations.
Still, even an older person with a moderate risk profile can expect to pay just a few thousand dollars a year for a solid policy. Considering payouts can cover most of your salary for months, or even years at a time, its usually well worth the investment.
Overall, disability insurance is worth it for most employees. Even if your odds of becoming disabled are relatively low, a disability can completely change your life-and be financially devastating when it sets in. Because many employers offer a disability benefits package, and because independent policies arent terribly expensive, its almost always worth establishing a policy.
What To Look For In A Disability Insurance Policy
When setting up my disability insurance, there were a few important areas I wanted to review before signing on the dotted line:
- Monthly cost for desired coverage: Cost is a top consideration with any insurance product. Before settling on Freelancers Union, I shopped around for other disability insurance policies that came with higher monthly premiums. Rates may vary depending on the monthly benefit you choose, as well as factors like your age and health history.
- Waiting period: I picked a 90-day waiting period for my disability insurance as I always have an emergency fund with more than three months of living expenses. Depending on your financial situation, you may be willing to pay a little more for a shorter elimination period or can save by having a longer elimination period.
- Insurer ratings: Guardian is the insurer behind my policy. It is rated A++ by AM Best, a measure of the insurer’s ability to pay claims in the future. It also earns a positive rating from J.D. Power, a company that rates the customer satisfaction of insurers and other industries.
Ultimately, your disability insurance should cover your essential monthly bills if you are unable to earn a paycheck. Social Security Disability Insurance may offer you coverage as well, but it’s likely not enough to cover your bills on its own.
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How About Group Ltd
The advantage of group LTD insurance is that your employer may subsidize a portion of it, lowering your cost.;It can even pay for the entire thing, in which case you dont need to ask whether its worth it.
The downside of group long-term disability insurance is that you have less opportunity to tailor the policy to your needs. For example, you cant choose to add optional riders. A rider that you can buy on your own disability insurance policy is called the cost-of-living adjustment. With this rider, your disability insurance benefits increase every year to keep up with inflation. Your group LTD doesnt let you choose this type of rider.
Another downside is that you will lose your coverage if you change your job.
Thats why even if you have group LTD, you may want to consider adding an individual policy. One that you can use to supplement your group LTD.
Your Income Can Be Worth Millions Over Your Careerhow Well Is It Protected
Think of all the things your income pays for. Its a huge list. There are the necessities, like housing, food, and utilities. And the things that make life fun and special, like vacations, dinners with friends, and movie nights out.;
Your income is the financial foundation of your life. Individual Disability Income insurance protects your foundation if the unexpected happens. It provides monthly benefits like a paycheck if you become too sick or hurt to work. Learn how it can help protect your current and future earningsand see the true value of having this protection now.
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It’s Legal For Some Insurers To Discriminate Based On Genes
If you were offered long-term-disability coverage when you were hired and didn’t sign up, it may be tougher to do so during the open enrollment period, says Fuerstenberg.
A growing number of health plans require employees to show “evidence of insurability,” meaning they must answer a series of health-related questions before they’re approved. Some long-term-disability policies may also have pre-existing condition provisions that, for example, won’t pay benefits for a condition for up to a year.
Kaiser Health News is an editorially independent news service that is part of the nonpartisan Henry J. Kaiser Family Foundation. Follow Michelle Andrews on Twitter: .
Is Mortgage Disability Insurance Worth It
Mortgage disability insurance may be worth it if you have a high-risk occupation and no savings fund to fall back on. It offers peace of mind that if you should be seriously injured, you wont lose your home before you get your finances back on track.
However, if youre eligible, its definitely worth looking into more comprehensive disability insurance options. These policies replace a portion of your monthly paycheck not just your mortgage payment. Many private insurance companies offer disability insurance, making it a better cost value than mortgage disability insurance offered by a bank.
It comes down to your eligibility for the policies that fit your budget.
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Where Can I Get Long
There are several places you can look for this type of coverage, starting with your employer. A group policy will usually be cheaper than standalone coverage, but remember that youll probably lose this coverage if you switch jobs.
Your financial advisor or life insurance agent can also help you to find a good policy. Companies such as Mutual of Omaha, Massmutual and Thrivent all offer good coverage at a reasonable price.
How Does Long Term Disability Insurance Work
For the most part, long term disability works just like any other type of insurance.
As the policyholder, you make recurring premium payments, typically on a month-to-month basis. In return, your insurance carrier agrees to pay you long term disability benefits if you suffer a serious injury or illness that prevents you from working for an extended period of time.
Each long term disability insurance policy spells out:
- The benefit amount, or how much long term disability will pay you on a monthly basis if you become disabled.
- The elimination period, or the amount of time you must wait after a disabling event before your long term disability benefits start.
- The benefit period, or how long your long term disability benefits will last if you become disabled.
- The definition of disability, or what types of conditions your policy will cover and what it wonât cover.
- The premium amount, or how much disability insurance will cost you on a monthly and annual basis.
Letâs dive deeper into each of these.
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How To Acquire A Disability Insurance Cover
Disability insurance cover can be secured as an individual cover or as a group disability cover. They are offered by different insurance companies, each with different terms.
If you choose an individual disability cover, you pay a monthly premium to the insurance company. The best part of it is that you maintain it for as long as you keep contributing. It is not affected even if you were to lose employment. You can still get one even if you have a group cover.
The next option is the group disability cover, which is mostly offered by the employer. In this cover, a group of people contracts the insurance to provide them with a group cover at a friendly price. The employer can either pay the full premium or spread it as part of employee deductions.
The Cost Of Critical Illness Insurance Depends On Several Risk Factors:
- Your age and sex The most significant risk factor for becoming critically ill is your age. Therefore, its arguably the most significant factor in determining your critical illness insurance premium. There are also differences in risk for biological men and women, with the risk of most illnesses peaking earlier for men than women.
- Your lifestyle Smoking is a critical lifestyle indicator of whether youll become critically ill.
- Your coverage Your premium will be directly related to the amount of coverage you choose. Plans are available that cover different numbers of critical illnesses, have different payout levels, and include optional benefits like the ability to convert your plan to another type of insurance.
- The type of policy you choose Term critical illness insurance, like term life insurance, covers you for a specific period. The most common term length is 10 years. When your term is up, you can choose to buy new coverage or let your insurance lapse. You can also purchase lifetime critical illness insurance, covering you until a certain age or death.
Since theres such a wide range of providers and risk factors, its almost impossible to give an estimate of how much critical illness insurance might cost you. To get an accurate price and help you decide, you can get a critical illness insurance quote online.
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Disability Insurance Can Be Affordable
When you realize the potential value of your future income earnings, protecting that with a Disability Income insurance policy is a smart decision.
And its affordable. The cost of a DI policy is usually around 1 3% of your annual income.6;Thats less than some of us pay for a daily cup of premium coffee or monthly smartphone bill. The younger you are when you purchase a policy, the lower your premium tends to be.
Another benefit? In addition to providing coverage thats flexible and customizable to your specific needs and budget, this individual DI policy stays with you, even if you change jobs or careers.
The time to purchase this protection is when youre healthy and workingand its easy to do. You can trade It wont happen to me for Im ready for whatever life brings by adding disability insurance to your financial checklist.
Disability And Injury Are Not Synonymous
Injuries are a scary reality of the workplace. Each year, 2.8 workers out of 100 suffer a non-fatal injury or illness while on the job, according to the most recent data from the U.S. Bureau of Labor Statistics.
But I work in a cubicle, so Im safe, you might think. What about arthritis? Digestive disorders? Depression? Even pregnancy can be considered a short-term disability if it hinders your income.
You dont need to work on an oil rig to be at risk for disability. It pays to start looking at coverage now, which you can do online.
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