Disability insurance: How to get it
Disability insurance: How to get it
Here are ways to get coverage:
- Sign up for employer-sponsored coverage at work. Employers who offer disability coverage often pay a portion or the entire cost of insurance premiums. Five states provide or require employers to provide short-term disability benefits, according to the Society for Human Resource Management : California, Hawaii, New Jersey, New York and Rhode Island.
Employer-sponsored insurance is available at your workplace. Employers who offer disability coverage often pay a portion or the entire cost of insurance premiums. According to the Society for Human Resource Management, five states require or allow employers to offer short-term disability insurance: California, Hawaii New Jersey New York, and Rhode Island.
- Buy disability insurance through the workplace. Some employers don't pay for disability coverage but offer it as a voluntary benefit. Employees can buy insurance through their employer's broker for a discounted rate.
Buy disability insurance through the workplace. Employers may not pay for the disability insurance, but they can offer it to employees as an optional benefit. This lets employees buy coverage through the employer's insurance broker at a group rate.
- Buy disability insurance through a professional association. Many professional associations offer group coverage to their members.
- Purchase disability insurance from a professional organization. Members of many professional associations can get coverage at discounted rates.
Purchase disability insurance from a professional organization. Many professional associations offer group coverage to their members.
- Purchase an individual disability plan. You can get it from an insurance broker or directly from an insurance company. Big sellers of individual disability insurance include Guardian, MassMutual, Northwestern Mutual and Principal. The majority of individual disability insurance policies are long-term, but some companies offer shorter-term plans.
- Purchase an individual disability plan. You can get it from an insurance broker or directly from an insurance company. Guardian, MassMutual and Principal are all major sellers of disability insurance for individuals. The majority of individual disability insurance policies are long-term, but some companies offer shorter-term plans.
Purchase an individual disability plan. It can be purchased from insurance brokers or directly through the insurance companies. Big sellers of individual disability insurance include Guardian, MassMutual, Northwestern Mutual and Principal. The majority of individual disability insurance policies are long-term, but some companies offer shorter-term plans.
Compare Disability Insurance Policies
Compare the following definitions and features to find out which policy is best for you.
- Definition of Disability - The definition of disability will vary from policy to policy. Some may pay benefits if you are unable to perform the duties of your occupation, while others may require that your disability keep you from performing the tasks of any gainful employment.
- The extent of disability - Certain policies require that you are totally disabled in order to receive benefits. Others may only pay for a certain amount of time or a specific period of time, if you can perform part of your work due to your injury. This is often referred as being partially disabled.
- Disabilities Covered - The list of covered accidents or illnesses considered disabilities under the policy will vary. Certain policies only cover disabilities resulting from accidents and will not include illness.
- The residual benefit(s) will fill in the income gap if your disability is partial and you can't perform your full job duties. It can either be included as part of your insurance policy, or added on to it.
- Amount of Benefits - A typical disability policy benefit is approximately 60 percent of earned income pre-disability. Benefits are generally based on your income at the time the policy is purchased. The percentage benefit can be affected by other sources of disability support such as Social Security disability payments, employer long-term disability insurance, etc.
- The waiting period is also known as the elimination period. You can choose how long to wait before receiving your benefits after onset. Premiums for policies with longer waiting times are usually lower. It is common to have to wait up to thirty days after this period to receive your first benefit payment.
- Length of Coverage - You will generally have an option of benefit terms ranging from one year to retirement age. A shorter period of coverage will likely result in a lower premium, but it could also mean that your benefits may run out before you reach retirement age.
- Inflation Protection - Not all policies will take inflation into consideration when calculating your benefit payout. A cost-of-living adjustment (COLA) may be an option for an additional premium. The rider increases benefit payments by a certain percentage each year, usually between 4-10%. Since your benefits will not automatically increase as you earn more, you may be able to buy additional coverage in order to match annual promotions or raises.
- The waiver of premium is a provision that exempts the insured from paying any insurance premiums for 90 consecutive days. It is typically included in a policy.
- Renewability - Most long-term disability policies come with one of two renewability provisions: non-cancelable policies will continue at the same price and coverage as long as you pay your premiums on time; guaranteed renewable means the policy will be renewed automatically, but the premium may increase. Conditionally renewable or optionally renewable may also be terms you'll see in a policy. For both of these options, the policy can be cancelled for a group of individuals in a common underwriting "class," by geographic location, or for other reasons stated in the policy. The insurance company will usually notify you prior to the renewal date of the policy if it is going to be cancelled.
- Tax considerations - In general, if you have an individual disability policy, payments received from the policy are income tax-free. If the payments come from a group policy that an employer pays some or all of the premiums on, a portion of the benefit may be taxable.
Buy Your Own Disability Insurance
Consider buying a policy if you don't have any or enough disability coverage at work or are self-employed. Disability insurance provided by your employer usually only covers a small portion of the base salary up to a certain limit. It's a good idea to supplement that coverage if your salary far exceeds the cap or you depend on bonuses or commissions. If this was up your alley, you might appreciate group life insurance
In order to calculate the amount of coverage that you are eligible for, an insurer will take into account other forms of disability insurance. Generally, you can't replace more than 75% of your income from all the coverage combined, Hoffman says.
- Customize the coverage with extra features, such as annual cost-of-living adjustments
Customize the coverage with extra features, such as annual cost-of-living adjustments
- Choose the insurance company with the best offerings
Select the company that offers the most competitive insurance products
- Keep the coverage when you change jobs. When you leave your employer, the coverage is no longer paid for by them. You may be eligible for coverage if pay full premiums on the disability insurance provided by your employer.
Keep the coverage when you change jobs. When you leave your employer, the coverage is no longer paid for by them. You may be eligible for coverage if pay full premiums on the disability insurance provided by your employer.
- Control the disability insurance. The coverage stays intact as long as you pay for it. Employer-sponsored insurance will cease if your employer stops providing disability benefits.
Control the disability insurance. The coverage stays intact as long as you pay for it. But employer-sponsored coverage will end if the employer decides to stop providing disability benefits.
- Collect benefits tax-free if you become disabled. If the employer pays for the coverage, you must pay taxes on the benefits.
If you are disabled, collect benefits without paying taxes. You must pay tax on benefits if the insurance is paid for by the employer.
According to the Council for Disability Awareness, the annual cost of a long term disability policy is generally between 1% and 3% your income. The cost is affected by a variety of factors.
- Age and health: The older you get and the more problems with your health you have, the higher the price.
Age and health: The older you get and the more problems with your health you have, the higher the price.
- You may pay more if you are a woman. Women tend to make more claims.
You may pay more if you are a woman. Women tend to make more claims.
- Smoke or not: you pay less for quitting smoking
- Your occupation: You'll pay more if you work in a job with a high risk of injuries
Pay more for a dangerous job
- Definition of Disability: the broader the disability definition, the more expensive the policy. A policy that covers you if you can't work in your own occupation but could earn income in a lower-paying job will cost more than a policy that covers you only if you can't work at all.
The definition of disability: The broader the definition of disability, the higher the premium. If you are unable to work, but can earn money in another occupation that pays less than your current one, you will pay more for a policy.
- Length of waiting period: This is known as the elimination period. By increasing the time before the benefits are paid, you can lower the premium.
Length of waiting period: This is known as the elimination period. You can reduce the premium by increasing the waiting period before benefits kick in.
- You'll be charged more for your income, the higher it is.
You'll be charged more for your income coverage the higher it is.
- Benefits length: the longer you are promised to receive benefits if you get disabled, the higher your premiums will be.
Length of benefits: The longer the period that the policy promises to pay out if you become disabled, the more you'll pay in premiums
- Premiums will be increased by adding extra features such as inflation protection and cost of living adjustments.
Extra features: Additional features, such as cost-of-living adjustments to protect against inflation, will increase the premium
Related LinksDifferent Types of Insurance Policies
Long-Term Disability Insurance: Protecting Your Future
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