Why You Need Disability Insurance – Compass Insurance Advisors
  • Estimated reading time: 4 minutes

    This article was originally published on SmartAboutMoney. Contact one of our advisors for more information about disability insurance.

    Why You Need Disability Insurance

    Disability insurance provides a source of income to people who are unable to work due to an accident or illness. Remember that your earning power is one of your greatest financial assets. (Take SAM’s free My Earning Plan course to learn more.)

    Without disability insurance protection, workers and their dependents are “living on the edge,” at risk of losing their homes and investments. If you need disability insurance, take a look at the details:

    • The average disability claim lasts almost 13 months and mortgage foreclosures due to disability occur 16 times as often as they do for death. Yet, more than 40 percent of full-time workers do not have coverage in the event of a short- or long-term disability to protect against a loss of income.
    • Research indicates that one-third of employed Americans will become disabled for at least 90 days at some point in their career. Yet, lack of disability insurance is a common financial error.
    • Adequate disability policies generally need to be purchased individually from an insurance agent. While some employers provide disability coverage, it is generally short-term and may replace only a small portion of a worker’s salary. In addition, if the employer pays for coverage, benefits are taxable.
    • Disability insurance is especially critical for self-employed workers and those who lack the ability to “bank” employer-paid sick leave. Financial experts generally advise purchasing a policy to replace about two-thirds (60 percent to 70 percent) of a worker’s monthly income. Insurance companies usually don’t provide coverage above this or it would discourage people from returning to work.
    • Two key features of disability insurance, that greatly influence its cost, are the definition of disability and the elimination period. “Own occupation” policies are more expensive because they kick in when you are unable to perform duties of the job for which you are trained — which means, even if you’re still able to do other types of jobs, but you are not able to do your chosen profession, then you can collect on the disability insurance. On the other hand, “any occupation” coverage defines disability as the inability to do any type of work. Many insurers also offer “split definition” policies that use an “own occupation” definition for several years, followed by an “any occupation” definition later on.
    • The elimination (waiting) period is the number of days after a disability begins before benefits are paid. The longer the elimination period (for example, 90 days versus 30 days), the lower the premium for a specified amount (for example, $1,500 a month) of disability insurance.
    • Read the fine print. Look for a disability insurance policy that is non-cancelable or guaranteed renewable and pays residual benefits to make up for lost income when a worker is unable to work at full capacity. For example, if an insured person goes back to work three days a week at 60 percent of full pay, the benefit would be prorated to reflect the actual amount of income lost.
    • Review the recurrent disability clause that describes what happens if an insured person becomes disabled again from a preexisting disability. For example, if someone becomes disabled again from the same cause, say, within six months of returning to work, they may not have to wait for another elimination period.
    • Consider purchasing a cost-of-living rider to protect the purchasing power of monthly benefits. Also check provisions related to disability benefits provided by an employer disability policy or Social Security. Sometimes income from these sources will be considered part of the policy benefit.
    • Consider purchasing a policy for the remainder of your working life (until age 65, for example).
    • Work with an independent insurance agent to shop around among competing carriers.
    • If you are unable to qualify for disability insurance at an affordable price consider investing the amount that you would have paid monthly for premiums, to build up your emergency reserves.
    • In a divorce decree, require an ex-spouse to purchase and maintain disability insurance if you are dependent on his or her income for support payments.
  • Leave a Reply

    Your email address will not be published. Required fields are marked *

Need Help?

Speak To Shem Today!

(801) 856-6151

Monday - Friday 8:00 am - 9:00 PM


Or Find Affordable Insurance Plans

Related Articles

Dynamic Blog Short Description

  • The American Rescue Plan Act’s Effect on Health Insurance

    Due to the impact of Covid-19, President Biden passed the American Rescue Plan Act (ARPA) on March 11, 2021. One of the proponents of ARPA was to lower monthly health insurance premiums. This was done by increasing the eligibility for health insurance subsidies. Before ARPA was passed, fewer peo

    Read More
  • Health Insurance for Pre Existing Conditions

    What types of health insurance policies will cover preexisting conditions? In this article, we are going to walk you through what you need to know if you or anyone you know needs coverage due to a pre-existing condition. We will inform you of which insurance plans cover and which ones do not cover

    Read More
  • Who is eligible for the Health Insurance Marketplace?

    In 2010, the Health Insurance Marketplace was created by the Affordable Care Act (ACA) also known as Obamacare. Any United States citizen is eligible to apply for health insurance through the Marketplace, and many people will qualify for lowered monthly payments through an advance tax credit. If yo

    Read More
  • What is the Health Insurance Marketplace?

    Imagine a food market, a place where people come to purchase their produce, a Health insurance marketplace is a place where people seek to purchase an affordable health insurance plan. The insurance marketplace is a Federal service created in 2010 by the Affordable Care Act (ACA) also known as Obam

    Read More
  • How Much Does Health Insurance Cost?

    Your health insurance cost will be determined by a few factors. The main factor that determines your health insurance premiums is what federal advance premium tax credit you qualify for. Other factors include tobacco usage, location, age, plan structure, and number of dependents. Federal assista

    Read More
  • Health Insurance In Arizona

    Purchasing Health Insurance In Arizona Many states have joined in running their own Affordable Care Act exchange, however, Arizona is one of the states that still uses the Federal Affordable Care Act (ACA) exchange. Meaning, that they use the Federal marketplace and follow the dates for open enr

    Read More
  • Health Insurance In Nevada

    Purchasing Health Insurance In Nevada Nevada is one of the states that runs their own Affordable Care Act exchange. Meaning, that they don’t use the Federal marketplace. Instead, Nevada uses its own state’s marketplace for residents to choose a health insurance plan.  Medicaid/CHIP Me

    Read More
  • When is Open Enrollment?

    When is open Enrollment? Due to the significant impact of Covid-19, the Biden-Harris Administration extended the open enrollment for this year, giving people the opportunity to enroll in a healthcare plan for an extended period of of time. In most states, Open Enrollment will start November 1, 2

    Read More
  • Health Insurance for Self-Employment

    Finding health insurance for self employment can be daunting. My goal in this article is to help you understand the cost of qualified health insurance, how to save money on health insurance, and other potential solutions for affordable health insurance. Cost of Qualified Health Insurance for Sel

    Read More

What Others Say About Us

Our Customers Love Us

Shem Barlow

(801) 856-6151

No Extra Cost. Professional Guidence. Complete Protection. Simplified Enrollment. Personalized Support.