Topics:Guides Disability Insurance 101
December 3rd, 2020
July 19th, 2021
May 20th, 2021
You've made a large investment in your career with years of expensive medical training and professional education. What would happen if you became unable to work due to a disability? Disability insurance can protect your finances by replacing lost income when you file a claim. These insurance benefits can be used to pay for your recovery, keep up with debt payments, and continue to provide for yourself. "The word 'disability' is really misleading, creating incorrect assumptions around what the insurance offering is. What disability insurance is, in essence, is a way to protect your income should things go wrong. If you aren’t able to work, you need something that covers your income so that you can survive, so you can pay your bills, your mortgage," explains Alex Williamson, co-founder and CEO of Asteya. Protecting your income with disability insurance is an important way to care for yourself. Yet, disability insurance policies have multiple features and terms that can make finding a good disability insurance policy challenging. Will Peach Medical Student Disability insurance concerns: One of my biggest concerns when it comes to disability insurance is just how complicated it is. For doctors in-training such as myself, we've got enough on our plates concerning board exams, residency applications and ever growing educational debt. We'll break down disability insurance in this expert guide so you understand what to look for and pitfalls to avoid. You'll learn more about long-term disability insurance vs. short-term disability insurance important policy considerations pitfalls to avoid companies to consider Long-term disability insurance vs. short-term disability insurance Long-Term Disability Insurance Short-Term Disability Insurance Waiting Period 90 days or more 7–14 days Benefit Period 2, 5, 10 years, until age 65, or for a lifetime 3, 6, or 12 months Long-term disability insurance is designed to cover disabilities that last years rather than months. The waiting period, or elimination period, usually lasts a few months. The elimination period is how long you have to wait before the insurance company starts paying monthly benefits. The benefit period for long-term disability insurance lasts several years or until you reach a certain age. The benefit period is how long you'll receive monthly payments. Long-term disability insurance offers valuable coverage if you lose your ability to work for a long period of time. Some employers offer long-term disability insurance. Insurance companies also commonly offer long-term disability insurance policies that you can purchase for yourself. In contrast, short-term disability insurance helps with disabilities that last a few months. The elimination period is a set number of days. The benefit period is usually several months and can be up to one year. Short-term disability insurance is most commonly available through employers and harder to find if you want to purchase your own. If you have a good emergency fund, you may not need to get short-term disability insurance because you'll be able to meet your short-term needs if you experience a disability. Back to Top Important policy considerations Nick Schrader Insurance Expert Focus on the details: When [physicians] purchase disability insurance, they don't go in-depth about the coverage due to some unknown reasons. When the situation needs it, they will face difficulties filing a claim because the insurance company's term of "disability" is different from what they think of, which makes the insurance useless. You want the coverage you need to be there if you need it. Pay attention to the following policy elements as you evaluate disability insurance policies: Definition of disability Income potential Inflation Debt Non-cancelable and guaranteed renewable feature Working with a trusted financial advisor can also be beneficial because they have valuable industry experience and insight. Edward Alferoff, CFP® Finance Expert Benefits of a financial advisor: An experienced financial advisor can be a major help should the physician have a pre-existing medical condition — physical or mental. The advisor can make the difference in the type of offer received from the carrier. One carrier may make a substandard offer, while another would make a full offer. And, should you ever think you have a claim, you may want to start with your advisor, who can provide some valuable direction. While they can’t ensure an outcome, they can help you have a much better experience. Definition of disability It's essential to understand your policy's definition of disability. Some policies define it as totally unable to work or have broader definitions of your occupation. Others offer an "own occupation" definition that defines disability as being unable to perform your typical job functions. Choosing a "true own occupation" definition is a narrower definition of disability, which offers better coverage. Nick A. Ortiz, Board Certified Social Security Disability Advocate by the National Board of Social Security Disability Advocacy and Ortiz Law Firm owner, offers a helpful example of why the disability definition matters: "Let's take a cardiac surgeon for example. A cardiac surgeon is a doctor that routinely performs heart surgery. If the surgeon develops a hand tremor, he or she may no longer be able to perform surgery. However, he or she may still be able to conduct consultations with patients. If the definition of the doctor's 'own occupation' is simply 'someone who has a degree in medicine and treats people who are sick or injured,' then a disability insurance claim may be denied because the doctor can still see patients. However, if the definition of 'own occupation' is more narrowly defined as a cardiac surgeon, then the physician may qualify for benefits with a hand tremor as he or she can no longer perform heart surgeries." Partial disability In addition to ensuring your policy has a favorable definition of disability, partial disability (also called residual disability) allows you to receive part of your policy's benefits if you develop a disability that limits how much you can work. "Being able to make a claim on a partial disability is crucial for a doctor's disability policy. If a physician can only work part time because of a disabling health condition and suffers a loss of earnings because of that, they should own a policy that allows them to go on claim," says Raymer Malone, CFP®, High Income Protection Insurance Agency owner. These partial benefits can help ensure that you remain financially stable when you must reduce your work hours due to a disability. Mental health If you are concerned about your current or future mental health, it's worth finding a policy that offers some coverage for disabilities related to mental health. However, it can be hard to find. "Mental Protection is a clause that most companies have reduced. There are currently only a couple companies in the market that treat mental concerns (stress, anxiety, depression, burn-out…) like any other illness and/or injury. Most companies have limited coverage," shares Brian Carlson, CFP®, CLU®, GCG Financial Wealth Management Vice President. Mental health is just as important as physical health and can result in disability, so pay attention to how your policy and insurer handles disabilities related to mental health. Back to "Important policy considerations" Income potential If you're still finishing up your training or just beginning your career as a physician, you likely haven't reached your full income potential. You're in a spot where you can't yet purchase the full coverage you may need later and at a prime time for getting a favorable rate through underwriting. Adding a future increase option to your policy allows you to get the most favorable rate now and increase your coverage as needed later without more medical underwriting. Ask the insurer or your financial advisor about any deadlines associated with this feature so you make the change when needed. "This rider is very important as a resident since once you become an attending you’ll want to bump up your protection. Each company works a little differently so it’s important for you to have an understanding and be comfortable with the rider with the company of your choosing," advises Carlson. Back to "Important policy considerations" Inflation You'll also deal with inflation and want to protect your spending power if you become disabled. Adding a Cost of Living Adjustment (COLA) rider will preserve your spending power by automatically adjusting your benefit for inflation. "For example, a monthly benefit of $10,000 per month may be an adequate replacement of income today but completely inadequate 15 years from now in the event the disability is long-term," offers Sam Price, Assurance Financial Solutions owner. Back to "Important policy considerations" Debt You likely have student debt for your professional training. If you become unable to work, you'll want a way to continue making payments. A disability insurance benefit can be used to meet your financial obligations. Some policies go further because they offer an additional rider that helps make payments on your student debt. Adding this rider to your policy can provide additional peace of mind for your finances because your student debt payments will be taken care of. Back to "Important policy considerations" Non-cancelable and guaranteed renewable feature Most disability insurance policies include a non-cancelable and guaranteed renewable clause which means that your policy's terms and benefits will remain the same as long as you keep your obligations and do not cancel your policy. This protection keeps the insurer from making unexpected changes or ending your policy. Back to Top Pitfalls to avoid As you make important considerations to ensure that your disability policy will meet your needs, you should also be aware of common pitfalls regarding disability insurance: Relying on employer-sponsored coverage Delaying coverage Choosing an unreliable insurer Understanding these pitfalls and the long-term effects they can have will help you make better choices as you protect yourself and dependents. Relying on employer-sponsored coverage Although your employer may offer short-term and long-term disability insurance with its benefits package, most experts say it's a mistake to rely on these benefits. Remember that your employer-sponsored benefits end when you change employers. If you develop a disability between employers, you won't have coverage. Second, the monthly benefit payments from an employer-sponsored plan are taxed because the premiums are paid with pre-tax money. When you buy your own policy, you're using taxed money to pay the premiums which means that the benefits are not subject to the federal income tax. You'll keep a higher percentage of your monthly benefit from your own policy than you will with an employer-sponsored policy. For example, if your monthly disability benefit is $1,800, you would pay $213 each month in taxes with an employer-sponsored plan. That adds up to $2,556 per year. If you were receiving benefits from a disability insurance plan you purchased on your own, you would have the full benefit each month to cover your needs. When you consider that a doctor's disability insurance policy would have a higher benefit, the difference in the cash you'd have available with your own policy compared to one through your employer. Back to "Pitfalls to avoid" Delaying coverage Since your disability insurance rate is determined based on the policy features and underwriting, rates typically increase as you age. Underwriting is how insurers assess the risk of providing insurance and considers your medical history. "Even a slight change in health can cause the premium to go up by more than 25 percent. That doesn't sound like much, but over the course of a career, that can be a significant amount of money. So as a general rule, physicians and young doctors in training are always better protected by locking in a policy or even a supplemental as soon as they're able to," advises Price. Take advantage of your good health now, so you can get good pricing on your policy. Back to "Pitfalls to avoid" Choosing an unreliable insurer When you purchase disability insurance, you're counting on your insurer to make benefits payments when you make a claim. Your financial stability and a large amount of money are on the line. "There are a number of companies that will offer protection for a physician. Many of those insurers can be ruled out though based on their poor claims experience," says Price. Good independent insurance agents can offer valuable insight on trusted insurers because of their industry experience. Beyond working with a trusted insurance agent, there are several other factors you can research. Check the financial strength ratings of the insurer issuing your policy. These ratings indicate an insurer's financial stability and likelihood that the insurer will be able to meet its claims obligations. You may work with an insurance agent, financial advisor, or agency to buy a policy, but the insurer is the entity that backs the policy financially. If you're working with a third-party, ask which insurer offers the policy and check their financial strength. You can also check for official complaints and past lawsuits to understand more about the insurer. The nature of these complaints and lawsuits and how many there are will help you gauge how well the insurer treats policyholders and handles claims. Customer reviews are another way to understand how well an insurer treats its policyholders. Pay attention to what reviews say about their experience after they've purchased a policy because this insight is more valuable than how the purchase process went. Price shares why choosing a reliable insurer is more important than finding the lowest price: "I have a personal client who dropped an excellent disability policy eight years ago for a policy with a lower premium but with a substandard insurer as 'all insurers are roughly the same.' She couldn't have been more wrong though. Within a year of making that change, she developed a macular degenerative issue which caused a permanent disability. She's been completely disabled for roughly six years now with no monthly benefit as the insurer has denied the claim for years." Back to Top Companies to consider Many insurers offer disability insurance, and it's important to find a trustworthy company. Any insurance provider you choose should have high financial strength ratings. These ratings indicate an insurance company's financial stability and likelihood to be able to meet claims obligations. When it comes to shopping for a policy, you can work with an agency or directly with an insurer. Best Company collects customer reviews for both agencies and insurers to help you understand the customer experience and find the best company. Currently, Best Company hasn't received many reviews for disability insurance, so conclusions about the customer experience with the companies below are limited. Despite this lack of valuable data and insight, the companies below offer helpful features as you take care of your disability insurance needs. Online application and policy issue: Breeze Breeze ranks #2 on BestCompany.com. The company offers a quick online application, and qualifying applicants can apply and buy a policy in one sitting. Although some applicants may not qualify, this streamlined process makes Breeze stand out and ideal for people trying to get disability insurance quickly checked off their to-do list. Customer Review: ConnorMeuret from Omaha, Nebraska "I discovered Breeze while searching the internet for disability insurance coverage. Breeze made it easy for me to understand exactly what coverage I was getting and really just made the overall experience much more enjoyable then I was expecting. Thank you, Breeze!" Breeze doesn't issue the insurance policies it sells. Instead, policies are issued by either Assurity Life Insurance Company or Principal Life Insurance Company. Both of these insurers have high financial strength ratings, so you can be confident when working with Breeze. Disability Insurance from Breeze Learn more about Breeze's quick application process and read customer reviews. Learn More Policy comparison: Policygenius and LeverageRx Both Policygenius and LeverageRx make it easy to compare disability insurance policies from multiple insurers. You'll find policies from financially strong insurers from both companies. Although there are some similarities between the two, there are key differences that make each one stand out. Policygenius doesn't have enough customer reviews to rank on BestCompany.com. However, the company makes it easy to view premium pricing ranges online. For specific quotes and policy information, you'll need to provide contact information to Policygenius so you can receive details about policies from multiple companies that may fit your needs. The company also has experience helping people with complex medical histories find a disability insurance policy to meet their needs. Policygenius only works with insurers receiving high financial strength ratings, so you can have peace of mind that your policy will be issued by a dependable insurer. Although Policygenius's process isn't as fast a Breeze's, the advantage of working with Policygenius is the ability to compare rates and policies across insurance providers. Disability Insurance from Policygenius Learn more about Policygenius's application process and customer service. Learn More Similar to Policygenius, LeverageRx doesn't have enough customer reviews to have a rank on BestCompany.com. However, LeverageRx specializes in disability insurance for medical professionals and offers a three-step process to view quotes online. It's convenient to view policy options and pricing from multiple insurance carriers online. When you find one that meets your needs, you can finalize your application with an agent. LeverageRx also works with highly rated insurers, so you can be confident in the financial stability of the insurer. Disability Insurance from LeverageRx Learn more about LeverageRx's online tools and insurer comparision. Learn More
Guest Post by Jack Wolstenholm Health insurance plans often have gaps. Holes in coverage that lead to huge bills, or worse — the inability to get the treatment you need at all. To plug these holes and fortify your financial safety net, you can purchase additional types of insurance. Two such types are disability and long-term care insurance. In this article, we’ll break down the ins and outs of both, including what they cover, how benefits work, how much they cost, and the best time to buy. What they cover Disability insurance covers you against the risk of losing your income — specifically, the loss of your ability to earn a paycheck in your occupation due to injury or illness. Leading causes of disability insurance claims include musculoskeletal disorders, diabetes, heart attack, stroke, back pain, broken bones, and complications from pregnancy. In order to qualify for disability insurance benefits, you must prove your condition meets your policy’s definition of disability. To meet an own-occupation definition of disability, your condition must either prevent or limit your ability to perform some or all the duties in your job occupation. However, you still may be able to work in another occupation and receive benefits simultaneously. To meet an any-occupation definition of disability, your condition must prevent you from working in your current occupation or any other occupation. Essentially, you must prove the inability to work, period. Long-term care insurance covers you against the risk of having to pay for the cost of a nursing home, assisted living facility, or home health aide if you become unable to care for yourself. The policy helps pay for the necessary care facilities often required by people with: Dementia, Alzheimer’s disease, and other cognitive disorders Parkinson’s disease and other neurological disorders Chronic conditions that limit mobility and the ability to live independently In order to qualify for benefits, you must prove the inability to perform several daily living (ADL) activities: bathing, dressing, eating, walking, and using the bathroom. Without coverage, the cost of long-term care can quickly become financially overwhelming. Key Takeaway: Both disability and long-term care insurance offer protection against health-related financial risks — lost income and long-term care expenses — not covered by private health insurance. How benefits work Disability insurance pays a monthly benefit if you experience a disabling event that prevents you from working. How much your policy pays out depends on the benefit amount you select, which is determined by how much income you earn. When benefits begin paying out after becoming disabled depends on the length of your waiting period, and how long benefits will last depends on whether you have long-term or short-term disability insurance. Typically, a disability insurance policy will replace somewhere from 40 percent to 80 percent of your monthly pre-tax income. This is your money to use however you like: pay bills, cover everyday expenses, whatever you need to provide for yourself and your loved ones. A long-term care insurance policy will pay benefits in one of two ways. If it is an expense-incurred policy, you will be reimbursed for the long-term care expenses you are charged, up to a maximum benefit amount. You must submit claims based on what you have spent to receive your benefits. On the other hand, an indemnity policy will pay out a set dollar amount regardless of the cost of the service you receive. You will begin receiving benefit payments once you receive long-term care and after your policy’s waiting period ends. Key Takeaway: Disability insurance replaces lost income for you to use freely, whereas long-term care insurance benefits must be put toward qualifying long-term care expenses. How much they cost The cost of disability insurance is determined by a range of personal factors and policy choices. Your age, gender*, location, health history, lifestyle choices, and job occupation all may influence your monthly premium rates for better or worse. Policy choices, such as the benefit amount, benefit period, elimination period, and any additional riders you select, will also impact what you pay for coverage. Ultimately, you can expect to spend somewhere between one to four percent of your annual income on disability insurance coverage. Just like disability insurance, the cost of long-term care insurance depends largely on details from your personal background and the policy choices you make. Cost also increases as you age due to the increased likelihood of filing a claim — the older you get, the more likely you become to experience a qualifying health event that requires long-term care. The main difference between how these two types of coverage are priced is that long-term care insurance is not impacted by your job occupation. Key Takeaway: Both disability and long-term care insurance become more expensive the older you get, but that doesn’t mean both should be purchased when you’re young. (More on that below.) *Traditionally, women pay more than men with all other factors equal because historical data shows they are more likely to file claims. However, Massachusetts passed legislation to prevent insurance companies from using gender as a determining factor in the cost of coverage. New York has followed suit by introducing legislation as well. The best time to buy It’s best to buy disability insurance early on in your working years. There are two reasons for this: The scope of disabling injuries and illnesses is wide and one can strike anyone at any time. In fact, the Social Security Administration estimates that one in four of 20-year-olds will experience a disabling event before reaching normal retirement age. As discussed above, the cost of disability insurance increases with age. It’s never going to be cheaper than it is today. It’s best to buy long-term care insurance later in life, ideally as you approach retirement. People who purchase coverage in their fifties may find it to be advantageous since they are in their peak earning years. And if you’re already on track with your retirement savings and other major expenses, such as raising children or paying down debt, are in the rearview, the cost will be easier to manage. Plus, it will help secure the retirement savings you’ve worked so long and hard to build. The numbers back this up, too: About half of 65-year-olds today will eventually require long-term care, according to the U.S. Department of Health & Human Services. Less than five percent of long-term care claims started in 2018 were for people under the age of 70, whereas over two-thirds of claims began were for policyholders age 81 years or older. Key Takeaway: Disability insurance is perfect for the young, healthy, and employed; long-term care insurance, for the wise who are winding down and entering their sunset years. Jack Wolstenholm is the head of content at Breeze, a digital-first insurance company that helps protect people against life’s most financially vulnerable moments.
What would happen if you were injured or severely sick and couldn't work? Disability insurance is designed to help replace your income if you are unable to work. These policies offer peace of mind and help protect your financial stability. As you consider whether or not to purchase a policy, use this guide to learn more about disability insurance and to help you consider your coverage needs. Understanding disability insurance Deciding whether or not you need disability insurance (includes personal stories) Applying for and purchasing disability insurance Understanding disability insurance Disability insurance offers set monthly payments that can help replace your income if you become unable to work. This valuable protection helps you maintain your financial stability. You can find two types of disability insurance on the market: short-term and long-term. Social Security also provides some disability insurance. Alex Sampson Insurance Expert Expert Tip: Many people confuse disability insurance with long-term care. Long-term care is there to protect you in case you're unable to do activities such as getting dressed, eating, or using the bathroom. Disability insurance covers your income. Social Security The federal government offers several programs to help people experiencing disability, including Social Security Disability Insurance and Supplemental Security Income. You must apply for benefits and will only receive benefits if you meet the eligibility guidelines. You can apply and check your eligibility online. Short-term disability insurance Short-term disability insurance is typically offered by employers as part of a benefits package. These policies generally have short waiting periods (e.g. seven days) and shorter benefit periods (e.g. two months). Waiting periods are how long you have to wait before your policy will start paying benefits. The benefit period is how long the insurer will pay regular benefits. Short-term disability policies are designed to help when you experience a disability that you can recover from relatively quickly and return to work. Some short-term disability insurance policies cover pregnancy. Kevin Haney, Growing Family Benefits president, underscores the value short-term disability insurance can offer women: "Only seven states have mandatory temporary disability insurance, and only six have paid family leave programs. Employers offering paid time off are the exception. Women who buy short-term disability before conception can enjoy partial income replacement benefits while unable to work during three common scenarios. Medical complications of pregnancy before her due date Recovery from labor and delivery after childbirth Postpartum medical disorders that delay her return to work." Long-term disability insurance If you're buying your own disability insurance policy, you'll usually purchase long-term disability insurance. Employers can also offer long-term disability insurance. These policies have longer waiting periods (e.g. three months) and longer benefit periods (e.g. until age 65). Long-term disability insurance is designed to cover disabilities that aren't easy to recover from to return to work. Since employer-sponsored disability insurance generally ends if you change employers, buying your own insurance can be a more stable coverage option. Depending on your income, you may be able to get more coverage though an independently purchased policy than an employer-sponsored plan. Emory Smith, founder of EJS Financial Management, advises purchasing your own long-term disability coverage if you have a high income: "For high income earners, workplace disability coverage rarely protects enough income so individually underwritten LTD is a must." Another key advantage of purchasing your own policy is that the benefits will typically not be subject to income tax. Benefits from an employer-sponsored policy are taxable because the premiums are typically paid with pre-tax dollars. If you buy your own policy, the benefits aren't subject to taxes because the premiums are usually paid with post-tax dollars, which lets you keep more of the benefit to take care of your needs. Back to Top Deciding whether or not you need disability insurance It's easy to view disability insurance as unimportant until you need it. It's too late to buy disability insurance if you didn't buy it before you needed it. As you make a decision about purchasing your own policy, here are four things to review: Understand your financial situation. Review the abilities you need to work. Consider the statistics. Assess your risk. Understand your financial situation. Ask yourself the following questions: Where does your money come from? Do you rely on one job or a string of part-time jobs? Do you earn from investments or rental properties? Do you have a side gig? How much do you have saved? What do your debt payments look like? What expenses could you cut from your budget if necessary? Answering these questions will help you evaluate how prepared you are if you were to experience a financial emergency or change in income. Emory Smith Finance Expert Expert Tip: A simple question determines the need for disability insurance — if my income disappeared, how would life change? If other income sources would continue uninterrupted, you probably don't need disability coverage. But if your income is critical, disability insurance is vitally important. Personal experience Dianne Birtley, freelance B2B copywriter: "I have purchased disability insurance. In fact, I've purchased two kinds of disability insurance: employment disability insurance and mortgage disability insurance. They were a significant cost, but I decided it would be worth it to buy both because if I were unable to work, I wouldn't be able to pay my bills or mortgage. Having the insurance gave me peace of mind. I also believed that if I had disability insurance, I wouldn't need it. Of course, I also believed that if I didn't have it, I would need it. So I decided to take the risk-averse approach, and buy both types. As it turned out, I actually did get sick and couldn't work. I used both insurance policies and was grateful that I had bought them. Being sick is very stressful, but having both types of disability insurance relieved the financial stress which eased my burden and allowed me to focus on getting healthy." Back to "Deciding whether or not you need disability insurance" Review the abilities you need to work. What cognitive functions and physical abilities do you need to do your current job? What about working in general? Disability insurance policies have specific definitions of disability. Policies generally only cover complete disability, or the total inability to work. Some policies allow for an "own occupation" definition, which means that you'll receive benefits if you can no longer work in the job you trained for. For example, a surgeon who experiences an injury on their hands may not be able to perform surgery even after recovery. Under an own occupation definition, the surgeon would likely receive disability payouts for the entire benefit period. Under a typical disability definition, the surgeon may not receive disability benefits because they could still work in another job, for example. Most insurers offer the option to include residual disability insurance coverage. This coverage allows you to receive partial disability benefits if you are still able to work but not at the same level as before. As you weigh the different disability definitions, consider your career and your finances. What would living off a part-time salary look like? What investments (e.g. school and professional training) have you made in your career that you want to protect? Back to "Deciding whether or not you need disability insurance" Consider the statistics. According to the Social Security Administration, over a quarter of people in their twenties will become disabled before retirement. While some factors may put you at higher or lower risk, life is unpredictable. You can experience injuries from an accident or develop an illness that can affect your ability to work and provide for yourself and family. Personal experience Alex Sampson, licensed health insurance broker with Health Benefits Associates: "I own my own disability policy and I've helped others set them up. I'm 35 years old and compete in triathlons. Most people think I may not need it but I'm the exact correct person who can get a low rate but I'm probably a higher risk. I could get hit by a car while running or cycling. I could get in a car wreck while driving. A million things could happen that could disrupt my income." Back to "Deciding whether or not you need disability insurance" Assess your risk. Although some events are unpredictable, others can be anticipated. Review your health and family health history. Some health conditions and health histories may increase the likelihood of a disability. Even if you're in good health now, preparing for the possibility of a different future is worthwhile. Consider your job. Some jobs are more prone to injuries than others. Office jobs tend to have lower physical risks than construction jobs, for example. Workers compensation offers some protection for work-related injuries. However, if you want to be confident in your income protection, purchasing your own disability insurance policy can help. Think about your hobbies and lifestyle. Some activities like skiing and slot canyon hiking can increase your risk of experiencing a disability. Of course, this isn't a reason not to do them. You just want to make sure you've taken care of yourself and protected your income. Personal experience Sandra Henderson, licensed professional counselor and LifeHacks founder: "I bought one just a year ago after my anxiety became a problem. When the pandemic started, I just noticed that it became a bit worse, to the point that controlling it (even with the use of meds) has turned to be a challenge for me. Such kind of insurance is important for me, especially that I work for a marketing company where quotas have a huge role in my professional responsibilities. Sometimes, when my anxiety kicks in, I have no other choice but to rest for some minutes until it stops. And so far, I still haven’t used it since this is just a backup option for me in any case the worst-case scenario arrives." Back to Top Applying for and purchasing disability insurance Underwriting for disability insurance policies can take a little bit of time depending on your circumstances and where you apply, so you may not be able to apply and purchase a policy on the same day. Fortunately, the insurtech company Breeze offers an online application process. Some applicants may be able to apply and purchase a policy in one sitting. Customer Review: Brian K. from Omaha, Nebraska "Awesome company to work with. I was able to apply and get a policy completely online on my phone. Price was great." Breeze is also one of Best Company's top companies for disability insurance. (We use an algorithm that weights customer reviews to rank companies.) Breeze has received a 5/5 average star rating. Apply with Breeze As a top-ranked company with high customer ratings, we recommend working with Breeze. You'll benefit from an online application process and may be able to be approved for and purchase a policy in one sitting. Apply with Breeze
Guest Post by Jack Wolstenholm Disability insurance and critical illness insurance have quite a bit in common. Both offer protection and peace of mind for life’s most vulnerable moments. Both provide benefits you can use to meet your financial obligations. Both are at their most affordable when you are young and healthy. Both can be obtained individually or as a part of a group. Both are purchases you hope you never need to actually use. However, they are far from interchangeable. To better understand the key similarities and differences between disability insurance and critical illness insurance, let’s take a closer look at how each one works, what they cover, how much they cost, and who needs what. How do they work? Disability insurance replaces a percentage of your income each month if you experience a disabling injury or illness that prevents you from working. Coverage is either long-term or short-term, and can be obtained individually through a private insurance company or as part of a group. Employers often offer group disability coverage as a benefit at little to no cost to employees who elect to participate in the plan. Critical illness insurance pays out a one-time lump-sum benefit if you experience a covered condition. Critical illness insurance can also be obtained individually or as a part of a group plan, and when employers offer it, they typically pick up the premium costs. Critical illness coverage is sometimes made available in the form of a benefit rider on life and disability insurance policies. This optional benefit comes at an additional cost when added to another policy. Disability insurance and critical insurance differ in the amount of benefits they will provide, as well as when and how those benefits are paid out. But it’s important to note that both types of policies allow you to use the benefits you receive however you want. Buy groceries, cover medical bills not covered by health insurance, make mortgage payments, replace lost income — these benefits are truly intended for whatever you need when times get tough. What do they cover? Disability insurance covers injuries and illnesses that limit your ability to perform the essential duties of your job occupation. What is and isn’t covered varies by carrier depending on the policy’s definition of disability. The two most common definitions of disability are any-occupation and own-occupation. Any-occupation is strict and specific. Under this definition of disability, you are ineligible for benefits if you can work any other job. This is true even if the jobs you are able to perform with a disability pay much less than what you earned prior to becoming disabled. To receive benefits, you must be deemed unable to work in any capacity. Own-occupation is broad and generous. A policy with an own occupation definition of disability protects your ability to work in your given profession. You will be covered if a disability prevents or limits you from working the job you had when you became disabled. Even if you’re able to work in another capacity, you will still be eligible for benefits. You may also be eligible if your disability limits the amount of hours you can work or the tasks you can perform. With this in mind, long-term disability insurance is most commonly used for serious disabling events that prevent you from working for longer than three months (even permanently), like stroke, musculoskeletal disorders, cancer, cardiovascular issues, and pregnancies with health complications. Short-term disability insurance is most commonly used for temporary disabling events that last less than three months and allow for a full recovery. Think minor injuries like fractures, sprains, and strains, and maternity leave for healthy pregnancies. On the other hand, critical illness insurance is more straightforward. It typically covers first-time diagnoses of serious conditions like cancer, heart attack, stroke, coma, paralysis, kidney failure, organ transplant, bypass surgery, and Alzheimer’s disease. However, it’s important to note that the complete list of qualifying conditions a critical illness policy will cover varies from carrier to carrier. Always check with the insurance company you are applying for coverage with to make sure you understand what its policy does and doesn’t cover. How much do they cost? Both disability insurance and critical illness are most affordable for the young and healthy. Cost increases as you age because the risk of becoming sick or hurt and filing a claim for benefits increases, too. The cost of disability insurance depends on a variety of personal factors and policy choices. Personal factors include gender, age, location, health history, job occupation, and income. Policy choices include the benefit period and amount, elimination period, and any optional riders you add to your policy. That said, the average cost of disability insurance is typically between 1 percent and 4 percent of your annual income. Another way to think about this is you can expect to pay between 2 percent and 6 percent of your policy’s monthly benefit amount in premium. As a result, some will pay $10 or $20 a month; others $100 a month or even more. It all depends on your situation. Like disability insurance, the cost of critical illness insurance can vary widely, and is determined by your personal background and policy choices. It takes all of the aforementioned factors into account except elimination period (since critical illness insurance policies do not have one), and your job occupation and income. Who needs what? In a country where one in four people will experience a disability in their working years and two-thirds of bankruptcies stem from medical issues, the value for both disability insurance and critical illness insurance is clear. But how do you know which types of coverage you actually need? Generally speaking: Disability insurance is a smart choice for healthy, employed individuals who rely on their source of income to meet their everyday financial obligations in life. This is especially true for those who have families that rely on their source of income, too. Critical illness insurance is a smart choice for those who have a health insurance plan with a high deductible they couldn’t afford to pay, concerns about their family health history, and/or insufficient emergency fund savings. Of course, there is no one-size-fits-all solution. To find your best-case coverage scenario, it’s important to do your own research, consult a reputable licensed agent, and shop around to compare rates. That way, you can lock in reliable coverage at a cost you can afford. Jack Wolstenholm is the head of content at Breeze, a digital-first-insurance company offers simple, affordable disability and critical illness insurance online.
Considering what would happen if you lost your job was a reality you, like many people, may have faced this past year due to the coronavirus. Although the extent of the job losses this year were due to a global pandemic, job loss can be experienced at any time and for many reasons like disability. Purchasing a disability insurance policy can help you stay financially stable if you become disabled and unable to work. If you're considering buying disability insurance to protect your income, asking the following seven questions will help you evaluate your needs and how to find a policy that meets them. How does disability insurance work? Do I need short-term or long-term disability insurance? How much disability insurance do I need? How much is disability insurance? What riders are most important to me? How long does disability insurance last? How trustworthy is the company? 1. How does disability insurance work? Disability insurance offers monthly payouts for a set period of time if you become disabled and are unable to work. When you purchase a disability insurance policy, you can usually customize the monthly benefit amount, the waiting period, and the benefit period. You can also add riders to protect or enhance your policy. The benefit amount is how much you'll receive from the insurer regularly during the benefit period. The benefit amount typically doesn't exceed 60 percent of your regular income. The waiting period is the time you have to wait after filing a claim before the insurer will start making benefit payments. This period is sometimes referred to as the elimination or collection period. "Some policies allow you to collect within the next 30 days, while others can stretch it out to more than 700 days. Know which one would suit you best and get the most out of these services," advises David Meltzer, East Insurance Group CEO and insurance agent. Waiting periods for short-term disability insurance are usually much shorter than waiting periods for long-term disability insurance. The maximum benefit period is how long the insurer will make monthly payments after the waiting period ends. The premium is the monthly fee you pay to have coverage. If you use post-tax dollars to pay your premium, your disability insurance benefits are not taxable. If your disability insurance policy is through your employer, you may need to pay taxes on the benefits. Chuck Czajka, Macro Money Concepts CEO explains: "If your employer deducts the premium, your disability could be taxable to you. If you pay the premium first and then your employer bonuses you the cost of the premium, the benefit could be tax-free to you." 2. Do I need short-term or long-term disability insurance? "When considering whether to purchase a disability policy, it is important to review your current needs versus the possibility of the future. Disability policies can range from relatively inexpensive to extremely expensive in terms of policy costs as well as the amounts of coverage; however, given the current state of the social safety net in the United States, they should be considered by anyone who has the means to access them," recommends Edward Guldi, workers' compensation and Social Security Disability attorney at The Perecman Firm, P.L.L.C. As Guldi notes, workers' compensation and Social Security Disability benefits are part of the social safety net in the United States, and these programs often take months or years to start making payments. Due to these delays, purchasing disability insurance can offer you more concrete peace of mind and a better safety net. Short-term disability insurance Short-term disability insurance generally pays benefits for a few months or up to a year. These policies usually have waiting periods of a few weeks. Policies are commonly offered by employers to employees. However, you may be able to find short-term disability insurance policies for individuals on the market. Before you buy a short-term disability policy, ask yourself these questions: How much money would I need to cover essentials if I couldn't work temporarily? Think rent, mortgage, utilities, food, gas, debt, etc. for up to three months. How large is my emergency fund? Seeing the amount you'd need to survive three months without income alongside your emergency fund will help you know how much you need to prioritize your savings. Keep in mind that you may also encounter medical costs, especially if income loss is due to an injury. Having more than the essentials set aside will help you maintain your financial security. How much are short-term disability insurance policies? If you don't have much savings set aside or want to grow your savings just in case, it may make sense to set up an automatic transfer to your savings account with the amount you'd spend on a short-term disability insurance policy. Long-term disability insurance Long-term disability insurance is more commonly purchased by individuals. While policies are also offered by employers, remember that the policy will expire when you leave your current employment. Depending on your job, you may be able to get a higher monthly benefit closer to your actual income than through a group policy. Long-term disability policies can pay monthly benefits over the course of several years and have waiting periods that can be a few months. As you consider long-term disability insurance, ask yourself these questions: How much money would I need to cover essentials if I were disabled and couldn't work for an extended period of time? Some injuries are long-lasting and can have permanent effects. Think about how much money you would need to cover essentials for a year. How long would my emergency fund last? Take stock of your savings and consider how many months you could last with just your savings. This information will help you determine a waiting period length that will meet your needs. How much are long-term disability insurance premiums? Make sure that rates are affordable and consider adjustments or riders that can help them fit your budget better. As you're evaluating long-term disability insurance policies, don't focus on the premium costs. While the premiums should fit your budget, you also need to pay attention to policy terms and coverage offered. Guldi recommends noting when the benefit period ends and whether or not there are benefit payment reductions over time. "Additionally, most plans have some sort of offset built into the policy either for worker’s compensation, social security or other sources of income. When shopping for a policy, it is important to look at all of the terms of the policy many times it is not a simple comparison the policy that costs $150 a week and pays $45,000 a year may be loaded with offsets that the policy which costs $225 a week and pays $45,000 a year does not have. Make sure to read and understand all of the terms before picking your policy," he concludes. 3. How much disability insurance do I need? In most cases, you'll be capped at 60 percent of your current income. Some exceptions to the 60 percent cap are available for some jobs including doctors. You may be able to get a lower premium if you opt for a lower benefit amount, but you'll receive a lower benefit when you make a claim. As you decide how much disability insurance to buy, keep your financial needs in mind. 4. How much is disability insurance? Monthly premiums for disability insurance vary based on how you customize your policy. Generally speaking, higher benefit amounts, shorter waiting periods, longer benefit periods, and adding riders increase your monthly premium. The reverse generally decreases the monthly premium. 5. What riders are most important to me? You can add riders to your disability insurance policy to add value and protect your policy. A few examples of riders are: Cost Of Living Adjustment (COLA) — adjusts your benefit amount automatically to account for inflation. Future purchase option — allows you to buy additional coverage later if your income changes. Noncancellable — prevents the insurer from cancelling your policy or changing benefit or premium levels. It can be a rider or included in a policy. Own occupation definition — defines disability as your own occupation so you'd receive a payout if you can't do your own occupation but could find work in another field. Residual disability — pays partial benefits if you are partially disabled and can't work a full schedule. Justin Nabity, CFP®, CLU®, ChFC® and Physicians Thrive founder highlights the importance of coverage for partial disability: "Statistically, you are more likely to become partially disabled than totally disabled. If a disability policy did not include the right clauses for residual benefits, you could go through a period during which your income is collapsing, while still needing to make payments and receiving no payout from the insurance company." Rider offerings can vary by insurer, so check to see what's available. If there's a specific disability insurance rider you're interested in, you'll want to find an insurer that offers it. 6. How long does disability insurance last? Unlike term life insurance policies that expire after a set period of time, your disability insurance coverage remains intact as long as you make the premium payments and the insurer does not cancel your policy. As far as disability benefits go, you'll receive benefits through the maximum benefit period or until you return to work if you file a claim and start receiving benefits. Check your policy's terms to learn more about the specifics. 7. How trustworthy is the company? With all insurance companies, check the financial strength ratings. These ratings indicate how financially stable and reliable the insurer is. High ratings are a good indicator that the insurer will be able to meet its claims obligations. Avoid companies with low financial strength ratings. You'll also want to look into the company's track record of paying claims. Danielle Barak, CLTC, Northwestern Mutual financial advisor recommends looking at a comparison report: "Prior to purchasing a policy, people should look for the company's integrity. Since disability insurance is not black or white, it’s important to understand the insurance companies' claims process and how often they pay out their claims. I suggest that my clients review a company comparison report. How challenging it is to get insured and how many claims the insurance company pays out, says a lot about the company. Disability insurance is an important policy to research and work with a financial advisor on, to make sure that one understands the ins and outs that are covered." Considering and comparing multiple insurers and policies can help you find a policy that meets your coverage and budget needs. Working with an independent advisor can help you find the best fit. "People should be looking for an experienced and knowledgeable team that is independent (not someone who only works for one insurance company) to work with them to find the options best suited for their unique situation," suggests James Jaderborg, CLU, ChFC®, North Star Consultants & North Star Resource Group associate partner financial consultant and wealth manager. Customer reviews are also helpful when evaluating companies. They can give you insight on the customer experience, which can further help you find a good disability insurance company to work with — whether you work with an insurer, agency, or insurtech company. Finding a trustworthy insurer will help you have peace of mind when purchasing disability insurance. Looking at financial strength ratings, comparison reports, customer reviews, and getting help from professionals will help you find a good company and policy that meets your needs. Disability Insurance Learn more about disability insurance policies by looking at the top-rated companies, their offerings, and customer reviews. Learn More
Guest Post by Jack Wolstenholm Health. Life. Home. Auto. When it comes to your insurance needs, these types of coverage are probably the first that come to mind. And rightfully so. Together, they help protect how you and your loved ones live life. However, none of these policies will protect your greatest asset — the ability to work and earn a living. After all, it’s your income that empowers you to buy a home and a car, put food on the table, and pay the bills (including all of those monthly insurance premiums). This gap in coverage is one that far too many people experience, oftentimes because they don’t fully understand what their options are. So, what is the best way to protect your income? That’s exactly what disability insurance, the focus of this simple, straightforward guide, is designed to do. Understanding how disability insurance policies work Disability insurance is insurance for your paycheck. If you experience a covered disabling event, your insurance company will pay you a monthly benefit to replace a portion of the income you lose from not being able to work. That’s why it often helps to think of disability insurance as income protection. Every disability insurance policy includes the following components: The premium amount is how much you pay to the insurance company for coverage, depending on a number of personal factors and policy choices. Typically, premiums are paid on a monthly basis. The benefit amount is how much your disability insurance policy will pay you in benefits if you experience a covered disability. The higher your benefit amount is, the more you will pay in premiums. The benefit period is how long benefits from a disability policy will last if you experience a covered disability event. The longer your benefit period is, the more you will pay in premiums. The elimination period (or waiting period) is how long you must wait after a disability occurs before benefits kick in. The shorter your elimination period is, the more you will pay in premiums. The definition of disability states what is and what isn’t a covered disability based on how it impacts your ability to work. The more comprehensive your policy’s definition of disability is, the more you will pay in premiums. As you can see, the policy choices you make impact the cost of disability insurance greatly. But how much you pay for coverage also depends on a number of personal factors, including your age, gender, health history, and job occupation. That’s why it’s smart to put a policy in place when you are young, healthy, and employed. The different types of disability insurance, explained Insurance can quickly get confusing and, unfortunately, disability insurance is no exception. Let’s take a closer look at the main types of disability insurance coverage you should understand. Individual disability insurance vs. group disability insurance Individual disability insurance is personal coverage you can purchase on your own through a private insurance company. When you buy an individual disability policy, you are responsible for making payments on-time to keep your coverage in-force. Your individual policy is portable, which means it will stick with you as you change employers throughout your career. Group disability insurance is coverage that can be purchased by an employer, association, or organization on behalf of a number of individuals. When you join a group disability insurance plan through work (the most common scenario), your employer will typically pick up most, if not all, of the cost. While affordable group coverage is an employee benefit you cannot afford to pass up, it doesn’t mean rule out the need for individual coverage. For one, participation in a group plan is contingent upon membership. This means if you leave your employer, you lose your coverage. (Technically, your employer can cancel the plan without your consent at any time, too.) Furthermore, group disability plans use your base salary to determine your benefit amount. This excludes any commissions and bonuses you earn, and any benefits you receive will be taxed. Group disability insurance plans also place a cap on benefits at a certain dollar amount, raising concerns for high-income earners. With individual disability insurance, you can secure a higher benefit amount that better reflects your total net income. Better yet, any benefits you receive will not be taxed since the premiums are paid with after-tax dollars. Long-term disability insurance vs. short-term disability insurance Every individual and group disability insurance plan offers coverage that is either long-term or short-term in nature. As its name suggests, long-term disability insurance covers serious injuries and illnesses that last several months, years, or even permanently. Benefit periods may last one, two, five, or 10 years; or until age 65 or 67. Elimination periods may last 30, 60, 90, 180, or 365 days. On the other hand, short-term disability insurance covers temporary conditions that most people are generally able to quickly recover from and return to work. Benefits may kick in after an elimination period of seven, 14, or 30 days, and last for a period of three, six, or 12 months. While short-term coverage may be cheaper than long-term coverage upfront, that’s because it pales in comparison to the protection that long-term coverage provides. The right long-term disability insurance policy will replace a greater portion of your income for a wider range of disabilities and, of course, for a longer period of time. Do I truly need disability insurance coverage? No one wants to add another monthly expense to their budget — especially if it’s something you may never even need to use. While this logic works for many things, like extra TV streaming subscriptions and neglected gym memberships, it doesn’t for disability insurance. Here’s why: The chances of becoming disabled are higher than you may think. According to the Social Security Administration, approximately 25 percent of American workers will experience a disabling event at some point in their careers that prevents them from working for at least one year. If that seems high, it’s probably because what constitutes a disability is often misunderstood as well. Sudden accidents happen, but they only account for a small percentage of disabling events. The Council for Disability Awareness reports that over 90 percent of claims for long-term disability insurance benefits result from serious conditions that develop over time. These include medical illnesses, such as cancer and heart disease, and musculoskeletal disorders, such as arthritis and back pain. Knowing this, ask yourself: How long could you last without a paycheck? If you’re not all that confident in your answer, just know you’re not alone. As the global COVID-19 pandemic began its tear across the United States in March, GOBankingsRates conducted a survey that discovered nearly 50 percent of Americans didn’t have enough emergency savings to last longer than three weeks. It’s always smart to be proactive with your finances, but especially in uncertain times like these. Set aside some time today to evaluate your disability insurance needs and protect your greatest asset — your income. Top Disability Insurance Companies See BestCompany.com's top-ranked companies, including Breeze, and learn more by reading customer reviews. View Top Companies Jack Wolstenholm is the head of content for Breeze, a disability insurance platform that offers personalized quotes and policy recommendations online.
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