Navigating life can be a complicated journey, often filled with unexpected obstacles that require careful attention and planning. Among the numerous risks we have to anticipate is a disability – an incident or circumstance that has the potential to impact not only your ability to work and generate an income but also your lifestyle overall.
To help protect against this eventuality, there is something called disability insurance – key coverage designed to provide protection for you and your family should you become unable to work due to physical or mental injury. In this post, we’ll explain what exactly disability insurance is all about and why it’s so important!
1. What is Disability Insurance and How It Works
2. Who Should Consider Buying Disability Insurance
3. The Different Types of Disability Insurance
4. Benefits of Having Disability Insurance
5. How Much Does Disability Insurance Cost
6. Understanding the Role of Social Security in Disability Insurance
What is Disability Insurance and How It Works
Disability insurance is a form of coverage that assists individuals who are unable to work due to a disability or debilitating illness. This type of insurance is crucial for individuals who rely on their income to support themselves and their families.
Disability insurance provides a portion of the individual’s pre-disability income, usually between 60%- 70% of your income, on a monthly basis when they cannot work due to a qualifying disability. In Employer group plans, the income you receive during your disability would be taxable, but in an individual plan, the income would be received tax-free.
Having an income stream can help alleviate the financial burdens that come with being unable to work and allow individuals to focus on their recovery. Disability insurance policies vary depending on the provider, so it is essential to thoroughly review the terms and conditions before purchasing a policy.
If you would like to find out more about a disability insurance policy, click here to schedule a one-on-one, 30-minute introductory meeting.
Who Should Consider Buying Disability Insurance
Disability insurance is a critical investment for anyone who wants to protect their income in the event of an unexpected injury or illness. While many people think disability insurance is only necessary for those working in high-risk jobs, the truth is that anyone who relies on their income to pay the bills should consider coverage.
In fact, the majority of disabilities occur outside of the workplace, making it even more important for individuals to have disability insurance in place. Whether you work in construction or sit at a desk all day, disability insurance can provide you with peace of mind because It’s always better to be prepared for the unexpected, and disability insurance is one way to ensure your financial stability in the event of an unforeseen circumstance.
The Different Types of Disability Insurance
There are various types of disability insurance policies available, such as short-term disability insurance, long-term disability insurance, and high-limit disability insurance. Short-term disability insurance provides coverage for a brief period, typically 3-6 months, while long-term disability insurance offers support for a longer duration, several years, or until retirement age. On the other hand, high-limit disability insurance is a policy that provides substantial benefits to ensure the policyholder maintains their lifestyle if they become disabled.
Inside of those three types of policy, you also have the ability to choose when those policy benefits begin to pay out. If you choose a policy that only pays out if you cannot work any job, it will only pay out if you can no longer work in any occupation. An example would be a surgeon who’s lost the ability to use his hands but still can make phone calls at a telemarketing company. With this type of policy, you would not receive any benefit because you can still find employment, even if it is in a completely different field, for way less income.
The benefit of having this type of policy is the monthly premiums will be the lowest, but is really designed to cover only catastrophic disabilities where you are unable to work in any industry because of your disability.
Another type of policy is a hybrid policy. This type of policy will pay benefits for a certain length of time, usually between 2 – 5 years, of you no longer being able to perform the functions in your current position. After that period of time, it would only pay if you cannot perform any job function in any industry.
Using the previous example, a surgeon would receive a benefit for the specified period of time that he can no longer perform his current job duties. After that time period has ended, the policyholder will only receive benefits if they can no longer perform any job in any industry. This type of policy can give you time to find another line of work that may provide a comparable salary.
While this type of policy has a higher premium than an any industry policy, this type of policy will give you time to find another profession that may pay you a similar salary to what you were previously making without having the pressure of finding immediate income while still learning how to function with their disability. For example, a surgeon can no longer perform surgery but still teach a class at a university.
There is also an industry-specific policy. This type of policy will cover you for as long as you can no longer perform your current job functions. Continuing with our previous example, a surgeon loses the ability to use their hands in surgery. This policy would continue to pay for as long the benefit period selected, as long as the surgeon can no longer perform his current duties.
These policies usually have much higher policy limits and premiums than an any industry or hybrid policy. However, these types of policies can let you focus on your physical health and not have to worry about your financial health. These policies help high-income earners have the same standard of living should they become disabled and can no longer perform their current job functions.
Each type of disability insurance plan has unique features, and choosing a policy that fits your needs and budget is crucial.
Benefits of Having Disability Insurance
Disability insurance is an important safety net for those who may suffer a serious illness or injury that leaves them unable to work and earn a living. It provides financial protection by paying a portion of the policyholder’s income should they become disabled. Without this coverage, individuals may struggle to make ends meet and keep up with bills and other obligations.
Disability insurance provides peace of mind and allows individuals to focus on their recovery without worrying about financial ruin. It’s a small price to pay for its significant benefits in the face of unexpected circumstances. Whether or not you work in a risky industry, investing in disability insurance can provide much-needed support should the unthinkable happen.
If you would like to find out which disability insurance policy will work best for your situation, click here to schedule a one-on-one 30-minute introductory meeting.
Understanding the Role of Social Security in Disability Insurance
Social Security plays a vital role in Disability Insurance, as it serves as a safety net for individuals who are unable to work due to a physical or mental impairment that is expected to last for at least a year or result in death. Disability insurance provides financial assistance to workers who are unable to work and earn a living due to this impairment. Social Security also provides medical insurance through Medicare to eligible individuals, including those with disabilities.
However, qualifying for Social Security Disability Insurance is not a quick process. It can take a year or two for you to be approved for Social Security Disability Insurance. Also, there are no guarantees you will be approved. While waiting to be approved, you will be required to use your funds to support yourself. That is why having your own disability insurance policy is so critical.
Having to fund your current standard of living while waiting up to two years to receive a decision can be absolutely financially devasting to an individual or family. That is exactly why everyone needs a disability insurance policy.
In conclusion, disability insurance is an important coverage everyone should consider. Understandably, individuals with higher-risk jobs may have a greater need for disability insurance than others. However, no one should overlook the potential of becoming disabled and its financial implications.
It is essential to understand how disability insurance works and the associated costs before purchasing a policy so you can decide what type of coverage best fits your needs. Lastly, if your injury or illness is severe enough, you may be eligible for Social Security Disability benefits in addition to any other insurance policies you may have in place.
Don’t wait till it’s too late – speak with an experienced professional if you are considering purchasing disability insurance coverage today.
This material contains only general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. Guarantees are based on the claims-paying ability of the issuing company.