Disability Insurance
According to the Social Security Administration, 25% of workers will experience a disability for 90 days or more before they reach retirement.
What happens if you can’t work for several weeks, months, or even years due to injury or illness? How long can you maintain your current lifestyle without a paycheck? In that situation, the only way to protect both you and your family from financial disaster, is to have disability insurance.
What is disability insurance?
Disability insurance is income protection. It is part of your financial safety net. It replaces a portion of your income if you can’t work for an extended period of time due to illness or injury. If you are disabled and unable to work and do the tasks required for your occupation, you are generally eligible to receive benefits.
Disability insurance isn’t just for people who work for and collect a paycheck for labor, or who are self-employed. Stay-at-home parents may also need protection. Disability insurance can help cover the cost of hiring help if a stay-at-home parent is sick or injured and can’t maintain the household and childcare.
There are two main types of disability insurance…short-term and long-term coverage.
Short-term disability: Provides benefits for a relatively short period of time, generally 3-6 months. There is an elimination period or waiting period before the benefits kick in and a maximum policy payout cap, which is based on your weekly wages. Depending on the terms of the policy, short term disability may cover up to 70% of your base pay. This does not include commissions or other incentives. Its purpose is to help bridge the gap between sick leave and your ability to return to work.
Long-term disability: Helps protect your paycheck for an extended period of time. Depending on the terms of the policy, and your class of employment, it may cover you for years, and even to full retirement. Just like short-term disability, there is an elimination or waiting period, usually 3-6 months, before payments begin. Long-term disability allows you some flexibility to customize the coverage to meet your needs. It is portable and moves with you if you change jobs.
Regardless of whether you buy long-term or short-term policies, the benefits end when the disability ends.
Cost is dependent on several factors:
- Age
- Gender
- Health
- Smoker or non-smoker
- Income
- Occupation
- Length of the elimination period
- Length of benefit coverage
- Extra features
Benefits of buying your own disability policy
- Choice… you choose the best insurance company that meets your disability insurance needs at the best price.
- Customization… you have the flexibility to customize your coverage with items like cost of living adjustments.
- Portability…your coverage stays with you if you change jobs. If you have coverage through your work, it ends when you leave the company.
- Control… as long as you pay the premiums, your coverage stays intact.
- Tax-free benefits… just like life insurance, the benefits are tax-free if you pay for them out-of-pocket (with net salary dollars).
Our knowledgeable insurance brokers at Real Life Associates are ready to educate and answer your questions. Let us help you customize a disability policy that meets your needs now and into the future.