Because sales and many other commission-based jobs usually require more people skills than motor-skills or physical exertion, commission-based workers tend not to think about disability insurance. After all, if you’re a good salesman all you need is a few moments of conversation with a client to close a deal, right? That may be true, but what if the pain from your disability is so severe that you can’t even think straight, let alone sway clients with your silver tongue? What if your potential disability prevents you from even getting out of bed to meet with a new client? The results could be career ending, and without a safety net in place, potentially devastating to your life, your savings, and your family’s well-being.
But while the need for disability insurance might be clear, commission-based workers often run into problems when it comes to calculating the amount of coverage they should buy. Since the pay for commission-based workers tends to vary, it can be much more difficult for them to predict a potential loss of income than for those who work on a fixed salary or hourly wage.
Commission-based positions sometimes begin with a base salary on top of which the employee earns additional compensation for goals met, or a percentage of each sale he or she makes. Most group disability policies will cover between 50 – 66% of one’s base salary only. This means that if the bulk of your income is derived from your commission, your group disability benefits are likely to be inadequate should you fail to take them into account when calculating your estimated disability insurance needs. However, with a supplemental individual policy, if you have a stable history of commissions earned, the insurance company can factor those in to your income for the purpose of determining the amount of benefit you can get.
To get an idea of how much disability insurance coverage you need, it’s helpful to look at your earnings for the past few years. Add up what you made from commission and possible bonuses and then add that to your base salary. Once you have an idea of how much you’d be missing if you were unable to work, talk to an insurance provider and see what they can do to make your policy reflect your actual total income rather than just your base salary. It could mean the difference between a comfortable safety net and financial tragedy.