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What Is Disability Insurance?
In general, disability insurance covers some of your income if something happens to you (like an illness or injury) and you can’t work.
The younger and healthier you are, the easier it is to qualify for a policy. But as you age, premiums increase. And if your health goes south, you may find it hard to qualify for an affordable policy at all.
But disability insurance doesn’t just cover freak accidents. Most claims are for things you may not realize are considered disabilities, like physical injuries, a heart attack, or cancer. These things could happen to anyone in any workplace.
Who Needs Disability Insurance?
Everyone! Did you know that one in four of today’s 20-year-olds will become disabled for 90 days or more before they turn 67 years old? You should have long-term disability insurance regardless of what job you have—whether you’re a high-rise window washer or a car salesperson. The reality is, you’re more likely to become disabled while working with heavy equipment or machinery than you are sitting at a computer all day, but don’t let this prevent you from protecting your income for the long haul..
Fortunately, disability insurance is a common perk offered by many employers if you have a high-risk job. Just remember: disability insurance isn’t there to make you rich! It’s there to pay the bills and put food on the table if something happens to you.
Types Of Disability Insurance:
Short-term disability insurance is exactly that: short. Payments only last for a few months to a year. The elimination period is normally around two weeks—so you can get your payout faster than with long-term coverage. But when it comes to cost, short-term premiums are around the same (but usually more expensive) than long-term premiums.
Anything over two years and up until retirement age is considered a long-term policy (but you could extend it into retirement if you wanted to). And whether you’re working at a desk or a construction site, you’ll want something in place until you turn 65.
We recommend getting as much coverage as you can—around 60–70% of your income. If you take out your own policy, it will stay with you whenever you change jobs. Filing a claim will require proof of an employment income to replace. Talk to your Point 1 Insurance representative to help set it up.
When you look at the numbers, long-term disability insurance really is your best option. We recommend getting coverage for at least 5 years or more, to cover long-term loss of income that your 3-6 month emergency fund won’t cover.
The only downside to long-term coverage is the elimination period (how long you have to wait before that first check arrives after the doctor confirms you’re disabled). Because long-term disability is designed to kick in after short-term disability, there is usually an elimination period of several months. The average time it takes to process a long-term claim is around 90 days.
What Isn’t Covered By Disability Insurance?
Disability insurance is only designed to replace a portion of your income — it doesn’t cover extra expenses like your medical bills and long-term care costs.
While pregnancy isn’t usually covered by long-term policies, complications that extend beyond pregnancy (like if a doctor orders you to stay at home after a C-section) might qualify you for benefits—but only if you had a long-term policy in place before you got pregnant.
Short-term policies do cover birth as a disability, but you might be waiting a long six-to-eight weeks for each check.
No matter the circumstance, however, it is important that you understand each potential disability insurer works differently, and at Point 1 Insurance it is our goal to pair you with the appropriate plan that best suits your needs.