• Two out of three Americans that have disability insurance don’t know what’s covered by their disability plans.
• Three our of four people surveyed don’t have disability insurance.
• One in ten of those surveyed worry that they will jinx themselves if they purchase disability coverage.
• Two thirds of the survey participants don’t have enough savings to cover living expenses for three months, let alone to cover a disability lasting longer than that time.
• One in three people live paycheck to paycheck.
• One out of two admitted they couldn’t afford to be out of work due to an illness or injury.
• Four in ten surveyed stated that they didn’t know the length of time covered by long-term disability insurance.
• Four in ten of those surveyed believe that disability insurance only covers disabilities caused by accidents or injuries (actually, only 5 percent of disabilities are caused by injuries or accident, whereas 95% are the result of illness).
• Three in ten of those who responded have either taken off of work, or knows someone who has, because of illness, injury or illness.
• More than have of the respondents claim that they are more concerned with their day-to-day expenses than their future expenses.

The survey also finds that most Americans are in need of more information about disability insurance and many who don’t have coverage would not survive financially if they were to become disabled tomorrow.

As an insurance broker, I find that many more of my current and potential clients have an understanding of life insurance and health insurance, but have very little knowledge about disability insurance.  When I tell my clients that there is a much greater chance of becoming disabled during their working years than there is of dying, they become a lot more interested in learning about disability coverage.

I have found life and health insurance that also have a firm grasp on the subject of disability insurance are far and few between, so make sure you seek out an insurance broker or agent that specializes in this coverage.  An independent agent  should be able to give you quotes from multiple companies and explain the differences in coverage between the companies.  Before you purchase a plan, make sure you understand how the policy would pay if you were to become disabled.

Maybe you have what we call “analysis paralysis,” in which you have studied yourself into fear of making the wrong decision.  If you don’t have any disability insurance, I can tell you that any policy is better than no policy, so now it’s time to take the leap and protect your income.  Your home is probably protected, as is your car, so why wouldn’t you now protect the income that keeps you in that home and behind the wheel of that shiny new car?

Obviously, the answer to the title question is, “now,” or “as soon as you can.”  I have witnessed several situations in which people waited too long.  The most extreme cases were the folks who contacted me after becoming disabled, asking if they could still purchase disability insurance.  There were others who developed health conditions that either excluded the condition (back injury is a good example of this) or would be an automatic decline by the insurance company.

If you are confused by the subject, which is understandable, find yourself a knowledgeable broker who represents multiple insurance companies, who can help you learn quickly and also, with a side-by-side comparison of multiple quotes, help you quickly decide on the best policy for your needs.  At ProtectYourIncome.com, we pride ourselves in how quickly we can educate a prospective client about this intricate insurance policy. 

• Own-Occupation Definition of Disability:  The best definition protects you in your medical specialty and continues to pay benefits even if you to work in another specialty or occupation.  Look for language that includes medical specialty as part of the occupation.

• Residual Benefits:  Pays a percentage of the benefit based on your percentage of lost income, if you can work part time or can only perform some of your usual and customary functions, provided you have a loss of income due to your disability.

• Recovery Benefits:  Similar to a Residual Benefit but without loss of time or loss of duties requirements.  You can be back at work full time, but as a result of your disability, you suffer a loss of income (20% with most companies, 15% with some).  You would still be eligible for a partial benefit.

• Future Guaranteed Insurability:  This benefit locks in your medical insurability and allows you to increase your coverage to keep up with increases in income.  The best definition allows you to exercise all or part of this increase on an annual basis.

• Cost of Living Adjustment (COLA):  If disabled, this feature allows for annual increases in your monthly benefit to keep up with inflation.  Look for a compounded benefit.

These are the key features that physicians and other professionals should look for in a disability insurance policy.  I would add that your policy should be from a strong, financially sound company so you won’t have to worry about benefits being paid, if needed.

I kept this brief due to time restraints. For more information, see:

Disability Insurance for Physicians

Disability Policy Features

The foundation of the financial pyramid is made up of:

• Insuring against premature death through life insurance
• Loss of potentially one’s greatest asset, the ability to earn an income, insured through disability insurance.
• Loss of property and suit protection with property and liability insurance.
• Having an emergency fund of 6 to 12 months expenses.

The statistical likelihood of having a long term disability (one that lasts more than 90 days before age 65) and the potential length of time of disability is as follows. The source of this information is the table put together by the state insurance commissioners entitled the 1985 Commissioners’ Disability Individual Table (A).

• At age 30, the average length of disability is 32 months, with the possibility of long-term disability at 1 of 3.
• At age 40, the average length of disability is 42 months, with the possibility of long-term disability at 3 of 10.
• At age 50, the average length of disability is 50 months, with the possibility of long-term disability at 5 of 22.
• At age 60, the average length of disability is 54 months, with the possibility of long-term disability at 1 of 10.

Knowing this information can help one with their thinking in prioritizing what to do in financial planning.

If you don’t have an emergency fund that’s easily accessible, start putting away a minimum of 10% of your gross income, if you can, go to 20% until you get to the goal of three to six months of expenses in that account.

Make sure you have your property properly insured and both a liability and an umbrella liability policy. See your property and casualty agent for that.

Get disability insurance and life insurance.  Learn about these from unbiased sites like ProtectYourIncome.com.for disability insurance and LifeInsure.com for life insurance.

When you’re comparing different options for disability insurance, be on the lookout for the areas where policies are likely to differ. Don’t assume that terms are defined in the same way from one policy to another. Pay close attention to the exact manner in which key policy terms, such as total disability and residual disability are described. That’s the only way you can be certain that you truly understand the terms and conditions of each policy option.

• Total Disability: Some policies use an “own occupation” definition of total disability, while others use an “any occupation” definition. The best policies use the own occupation definition, which means you’ll be considered totally disabled if you’re unable to continue working in your actual occupation. If your policy uses the “any occupation definition” unlike the “own occupation” definition, earnings from another occupation may offset your insurance benefit.

• Residual Disability: Pay attention to whether or not your policy’s residual benefit rider continues to pay only until you are able to return to your usual work schedule and duties or if you’ll keep receiving benefits until your income returns to 85% of the level it was prior to the disability.

Residual Disability Coverage Provides Partial Disability Protection

Some disability insurance policies pay benefits only in the event of a total disability. While a total disability is certainly devastating, partial disabilities can also result in a significant reduction in income. It’s a fact that your ability to earn a living can be seriously curtailed, temporarily or permanently, in the event of a partial disability. That’s why the best disability insurance policies include a provision for residual disability benefits.

It’s a good idea to look for a policy that pays residual disability benefits. However, don’t assume that residual benefits are all the same. Before you purchase a disability policy, find out whether it uses a time and duty definition or an income definition of residual benefits.

• Time and Duty Definition: Some policies pay residual benefits until an individual is able to return to his full work and duty schedule. This means that you’ll still receive a percentage of your disability benefits when you return to work part time. Your benefits will continue until you go back to your pre-disability work hours, performing the same job functions you were responsible for before experiencing medical problems. This option may be fine for individuals who work in hourly wage jobs, but often is not sufficient for professionals, commissioned sales people, entrepreneurs, and others whose earnings are performance based.

• Income Definition: If your earnings aren’t specifically based on how many hours you work each day or week, you’re better off with a policy that offers an income-defined residual benefit. For example, if you own and operate a service-oriented business or sell a product that has a long sales cycle, it can take a long time for you to build your earnings back up to the level they were before you became unable to work. You could be working a full time schedule, performing your usual duties, for months – or even longer – before your income fully bounces back from the time you had to spend away from the job. If your disability plan uses the income definition, you’ll keep receiving proportional benefits until your earnings return to the level they were before your bout with a disability.

 Many disability claims are of the residual disability nature, so be sure you’re protected with the right coverage.

Request a Disability Insurance Quote Now

Misconception #1: It’s not difficult to qualify for social security disability benefits.

Fact: Fewer than 35% of the people who apply for social security disability benefits are approved.

Misconception #2: Everyone who works qualifies for social security benefits following a disability.

Fact: In order to be eligible for disability benefits, you must have worked at least 10 years in a job in which you paid into the social security system.

Misconception #3: Social security provides sufficient disability coverage.

Fact: The average social security disability benefit, for those who are approved, is $722 per month.

Misconception #4: Employer-paid group disability policies are preferable to individual policies.

Fact: There are many drawbacks associated with employer-paid disability insurance, including the facts that coverage can be lost upon separation from employment and benefits received are taxable as income.

Misconception #5: All long-term disability insurance policies are essentially the same.

Fact: There are many significant differences amongst disability insurance policies, including the waiting period, length of benefits, and how disability is defined.

Misconception #6: Disability insurance isn’t as important as life insurance.

Fact: While life insurance is quite important, it’s not accurate to say that it matters more than disability coverage. It’s a fact that a 42-year-old adult is four times more likely to experience a disability during his or her working years than to die during the same time frame.

The value of short term disability insurance is to provide workers, who may not have short term reserves, money to live on for that initial period of time. In some states, such as California, a short term disability insurance policy is provided by the state and paid for automatically by you through your payroll taxes. The problem with short term disability insurance coverage is that without also having long term coverage, the money will stop if the disability incurred is serious.

Long term disability insurance, as the name implies, is insurance for a longer period of disability – 5 years, to age 65 and even in some cases for a lifetime. This is much more important. The financial devastation due to loss of income can be prevented by carrying a long term disability insurance policy. Professionals may carry life or health insurance to protect themselves and their families. But what if you develop a serious disability and cannot work? White collar workers who are used to earning comfortable incomes run the risk of financial hardship if they don’t have professional disability insurance. One’s income is what maintains lifestyle for both basics and comforts. It doesn’t have to be said that without an income one doesn’t survive; and professional disability insurance can help ensure that you and your family receive benefits. If you are a professional, we have professional disability insurance to meet your needs, whether you are established in your profession or just starting out in your career.

Long term disability insurance is available through an employer as a group disability insurance policy and also as an individual disability insurance policy. The value of an individual disability insurance policy is that you own it; it’s portable and if it’s a non-cancelable policy rates are locked in and as the name implies, it can’t be canceled.

Long Term Disability Insurance Strengths

Long term disability insurance can provide you with coverage until you are 65. The amount of disability insurance coverage is usually higher, up to 60% of your income.

Since you’re covering a large amount of income (A $5000 per month policy for a 35 year old to age 65 will pay up to $1,800,000 in total benefits) the overall cost of a long-term disability insurance policy is going to be higher. Even though this type of disability insurance does cost more, long-term disability insurance will more than pay for itself in the event you are disabled and unable to work. Professionals will want to ensure that they are able to maintain the standard of living that they are accustomed to. A professional disability insurance policy will help ensure that your lifestyle is protected. One additional reminder is to make sure that you purchase a disability insurance policy that is both non-cancelable and guaranteed renewable since these types of policies lock in the premium for as long as you have the disability insurance policy and also can not be canceled by the insurance company for any reason.

It’s impossible to predict when an illness or injury might strike. While it’s true that you might never find yourself needing to utilize disability insurance benefits, it’s a fact that 30 percent of the workforce between the ages of 18 and 65 will experience a disability of 90 days or more prior to retirement. While it’s preferable to be in the 70 percent of workers that aren’t likely to experience a disability, there’s no way to know for sure what the future holds for you and your health.

Don’t Bet on Disability Insurance Statistics

When you review disability statistics, it’s important to look beyond the numbers and percentages. It’s true that certain factors contribute to how likely it is that a particular person will become disabled. However, it’s also a fact that accidents and illnesses can strike anyone at any time, without warning. It’s just not possible to predict with certainty who will become disabled, or when.

Assuming that you don’t need disability insurance because you feel that statistics are on your side is a gamble, no matter how you look at it. If you bet that you won’t become disabled and you’re wrong, the financial consequences could be devastating for you and your family. Disability insurance isn’t expensive compared to the potential benefits and it’s an important way to make sure you can continue to take care of you and your loved ones in the event of an unforeseen circumstance.

What to Expect From Disability Insurance

Have you ever thought about what might happen to your family if you were to become unable to work? When you have a good long term disability insurance policy in place, this isn’t something you’ll have to worry about. If you become unable to work due to a covered event, your disability insurance benefits will provide you with funds that you can use to take care of your ongoing living expenses.

Taking out a disability insurance policy is one of the best investments you can make in your family’s long term financial security. In the event of an unforeseen health problem, you need to be able to focus your time and energy on getting well, not on wondering where you’re going to get the money to pay your mortgage or power bill.

I always counter with, “I do understand your concern, but let me ask you this – can you afford to be disabled?”  I know that’s a loaded question, but it gives my clients a chance to look at which scenario is the least affordable – paying 1% – 3% of their gross income in order to have 50% – 60% of their gross income (non-taxable in most cases) replaced in the event of a disabling injury or illness or; not paying any premium now and losing everything you worked so hard to accumulate (savings, home, cars, etc.) due to a cessation of income due to a disability?

Using the maximum percentage of income equation above, here’s another question I ask my prospective clients (usually after I know their gross income) – If you had a choice of the following compensation packages, which would you choose – an income of $100,000 without any disability income protection or; an income of $97,000 with a disability insurance policy that would pay you approximately 60% of your gross income (in after-tax dollars)?  It’s much easier to evaluate one’s need using this equation.

I also go on to explain that the cost of any insurance product is proportional to the amount of risk the insurance company is assuming.  I then go into the risk statistics of disability compared to a lower risk product like term life insurance.  There is a much higher likelihood of becoming disabled during your working years than there is of you dying.  The cost of the policies is indicative of those risks.

I am a firm believer that there is a disability insurance policy for all budgets.  You can purchase the most comprehensive policy with all the riders if you want the best coverage available.  However, you can also purchase a policy with lesser benefits and, therefore, lower cost.  The potential cost of not having any coverage is too much risk for most folks to take on.