Disability Insurance

Disability

Whether you own a business or you’re moving up in your career, success has always been key. Are you prepared if something were to happen to you? If you suddenly couldn’t earn an income? This is difficult to imagine, but one in four workers will become disabled during their working years. One out of every eight will experience a long-term disability that lasts more than five years.¹ Disability is a risk that every working person must face, regardless of their occupation. When people can’t work due to illness or injury, their income is also at risk. Disability insurance is one of the most effective ways to protect a portion of your income – and maintain your way of life.

How do disability insurance policies work?

A disability policy is a binding contract with an insurance company to pay a specific monthly benefit while you are disabled. Every policy – whether long term or short term – has five basic features:

• Premium: The amount you (or your employer) pay for the policy. Premium amounts vary based on the length and type of coverage, your health, the benefit amount, and other factors.
• Benefit: The amount you receive each month when you can’t work. It should be between 60 to 80 percent of your monthly salary. The benefit of an individual policy usually isn’t taxed (unless paid for with pre-tax dollars); for a group plan, if paid in part by your employer, the benefit will be taxable.
• Benefit period: The length of time you can receive benefits. For STD this will typically not be more than a year; for LTD it could range from two years to retirement, or until you recover from your disability.
• Waiting period: Also called an elimination period, it’s the amount of time after you are disabled until you can start receiving benefits. It will generally be shorter for short-term disability and longer for long-term disability.

Definition of disability

Every disability policy has a specific definition of what it means to be disabled to qualify for benefits. An own-occupation definition means you qualify if due to disability you can’t work in your occupation, including any specialty; any-occupation means you only qualify if a disability prevents you from working in any occupation for which you are or become reasonably suited by your education, training, or experience. Different levels of disability may also be defined, (for example, “partial disability”) which can qualify you for various percentages of your total benefit amount.

Disability insurance uses:

• Mortgage
• Utilities
• Credit card payments
• Auto loans
• Personal loans
• Retirement contributions
• Student loans
• College or childcare
• Groceries/dining out