When it comes to earning income, no one knows what the future holds, but having the best long term disability insurance can help protect you financially in the event that you are unable to work due to an injury or illness. Disability insurance can provide you with a steady income stream to help cover your living expenses, and in some cases, it can last well into your retirement years.
Short-term disability is important also but most workers are provided with short-term coverage by their employers. Both types of coverage are worth considering, but long-term coverage is typically the most valuable when it comes to protecting your income, especially when you’re younger and your chances of becoming disabled are much greater.
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There is no one-size-fits-all answer when it comes to disability coverage. The best way to find the right coverage for you is to understand the different types of available coverage and how they can meet your specific needs.
What is Long-Term Disability Insurance and How does it Work?
Disability insurance is a type of insurance that provides benefits to replace a portion of your income should you be unable to work due to a prolonged illness or injury. The benefits continue until you are able to return to work or reach the end of your benefit period.
When you are unable to work due to illness or injury, your long-term disability policy will provide you with financial assistance. To start receiving these benefits, you will need to submit a claim along with documentation from your doctor detailing your condition. Once your claim is approved, you will begin receiving payments based on the terms of your policy.
What does Long-Term Disability Insurance Cover?
Many things can lead to someone being unable to work and earn a living. Cancer, pregnancy, mental health issues, injuries, and musculoskeletal diseases are all top reasons for disability claims. Unlike worker’s compensation, long-term disability insurance pays benefits regardless of whether or not the injury or illness is job-related.
There are many advantages to having long-term disability coverage, especially when compared to Social Security Disability Insurance. For one, long term disability typically provides a larger benefit. And because it is usually more comprehensive, there is a higher likelihood that your claim will be covered.
Additionally, you can buy additional cancer, accident, or critical illness insurance to supplement your long-term disability benefits. This way, you will be protected financially even if you are unable to work for an extended period.
Who Should Consider Disability Insurance?
You never know when an accident or illness might strike and sideline you from work for an extended period of time. Long-term disability insurance can help protect your income and give you peace of mind in the event that you are unable to work due to a disability.
Working with a trusted insurance professional, you can plan ahead and be prepared for anything. Long-term disability insurance is an important part of personal risk management and can make all the difference in a difficult situation.
Don’t wait until it’s too late – contact an insurance professional today to learn more about long-term disability insurance.
Particular Coverages You Should Insist On
Just like there are many insurance companies that offer long-term disability coverage, there are many different types of coverages and riders that allow you to get the best coverage for your circumstances and budget:
- Own Occupation vs Any Occupation – Always select a policy where the definition of disability is “own occupation.” For example, if you are a thoracic surgeon and you injure one or both of your wrists which prevents you from performing surgery, “own occupation” coverage will pay benefits until you can perform surgery again. With “any occupation” coverage the company will stop paying benefits if you can teach about surgery in a classroom which will typically include a significant cut in pay.
- Residual Coverage – This coverage provides for the insurance company to pay proportional benefits if you’re able to return to work with a lighter workload and lower earnings until you are able to work a full schedule and your pre-disability income is restored.
- Noncancellable Policy – Always select a policy that is noncancellable as long as you pay your required premiums.
- Guaranteed Renewable Policy – Most policyholders are not aware of how critical it is to purchase a guaranteed renewable policy until they have filed a claim and the company non-renews your coverage as a result. Always insist on a guaranteed renewable policy. Be aware, however, that although the company must renew your policy, it can increase your rates.
- Premiums – Make certain before starting your policy that the insurance company cannot change the premiums specified in your policy and determine whether they will be level premiums or contain a guaranteed schedule of increases.
- Elimination Period – Your elimination period is the amount of time you must wait before the insurance company begins paying the benefits stated in your policy. The longer the elimination period you agree to, the lower your premiums will be. Although getting a lower premium by increasing your elimination period may seem like a good idea, consider the financial impact it will have on you and your family.
Other Optional Coverages to Consider
Student Loan Coverage
This optional rider allows the policyholder to buy additional coverage that is intended to pay on student loan debt if disabled and unable to work.
The future purchase option provides for the insurance to allow the policyholder to increase their benefit amount at a future date without having to go through medical underwriting. This is especially important for younger applicants who are likely to have increases in salary over time.
Although typically offered by select insurance companies, the retirement protection rider is additional coverage that will cover the specified contributions planned to go into the policyholder’s retirement plan such as a 401(k) or IRA.
There are other riders that are also available depending on the insurance company you select so be sure and discuss each of them with an insurance professional to determine which ones might be a good fit for your income protection plan.
The Bottom Line
As disability insurance specialists, we find it interesting that individuals who need income protection the most are generally not interested in the coverage. Typically, younger workers are more prone to become disabled than dying and yet many will purchase life insurance and forgo income protection.
In many cases, we find that young workers believe that having an employer-sponsored short-term disability is sufficient because they are not aware of how difficult it is to be awarded long-term benefits from Social Security.
In fact, to get social security benefits, the government generally will not even seriously consider your application for disability benefits unless you’ve been unable to work for a year or more.
You insure your life, your house, your belongings, your car, and your health, so why not insure your ability to earn an income?