Disability Insurance

Disability Insurance

"Most People DO NOT protect their most important asset...  Their ability to make money." 

If you have a serious injury or illness, there's a good chance you will not be able to work. Depending on the circumstances, you might miss work for only a few days. But if it's serious you could miss a few weeks, a few months, a few years, or in some drastic cases, you might not be able to work the rest of your life.​

You and your family are dependent on that income, and disability insurance (DI) is designed to protect your earnings.

The premium you pay for your disability insurance will be based on several factors. Many of which must be decided at the time of your application.

Age & Health

One of the largest factors in determining your premium will be your age and your health. Generally speaking, the younger you are, and the healthier you are, the lower your premium will be.

In addition, if you have a pre-existing condition, but are still fortunate enough to get a policy issued, your premium will most-likely be "rated-up." Meaning your premium will be artificially inflated to cover your pre-existing condition.

Waiting (Elimination) & Benefit Periods

The amount of time, in days, you are willing to wait before the insurance carrier processes your claim will have a significant impact on your premium. The longer the waiting period (ie. 90 or 180 days) the lower your premium.

Conversely, the amount of time, in days or years, that you collect benefits will also impact your premium. Typically, if you collect benefits for 30-90 days, you will have a significantly less premium than if you wish to collect benefits for 5-10 years.

Dollar Amount of Income Protected

Almost all disability insurance policies are designed to cover 60% of your taxable income. So naturally, the more income you make, the higher dollar amount you will be able to protect.

For example, if you make $5,000/month, you will be able to protect roughly $3,000/month. However, if you make $15,000/month, you will be able to protect roughly $9,000/month.

The higher the dollar amount the insurance carrier is required to protect, the more expensive your premium.

Riders & Extra Features

Do you want your benefit payments to keep pace with inflation? This is done by adding a Cost of Living Adjustment rider (COLA). Do you want to guarantee that your premiums will never increase? Add the Non-Cancelable rider. Do you want to keep receiving monthly benefits even if you are able to work, but in a different capacity? Make sure your policy includes the Own Occupation rider.

These riders, and many more, can all increase your total premium amount.

The Two Types of Disability Insurance

Short Term Disability Insurance

Short Term Disability Insurance is needed if you are a person who lives paycheck to paycheck, and you have no savings (or emergency fund) to fall back on when an injury or illness prevents you from working.

Advantages

Benefits can be paid after missing only 1 day of work

Typically benefits are paid to you quickly

Excellent resource if you do not have an emergency fund

Many employers offer Short Term Disability Insurance to their employees

Disadvantages

If not offered by your employer, policies can be expensive

Most people must be approved through underwriting, including a medial exam, before a policy can be issued

If after a claim you have received all of your short term disability benefits, but you are still unable to work, you will receive no more compensation.

Long Term Disability Insurance

​Long Term Disability Insurance is designed to pay you income if you are out of work (due to injury or illness) for longer than 3 to 6 months. In other words Long Term DI is ready to use when your Short-Term DI has expired.

Advantages

Gives you peace of mind that you will have the ability to pay your bills for months or years

Flexibility in plan design allows you to create a policy that fits your budget

One policy can cover multiple injuries or illnesses

Disadvantages

Most policies will only begin to pay claims after you have missed work for at least 2 months

Because of the flexibility in plan design, Long-Term DI plans can be confusing