Is Disability Insurance A Good Idea?

No, not yet. You might reconsider closing the tab. Disability Insurance may not be what you think it is.

Disability Insurance? What in the world of Insurance does that even mean? At first glance, one would imagine this is associated with insurance that caters to the underprivileged and ‘notoriously’ handicapped. We would be glad to bloat that assumption. People almost never think about the possibility of sustaining an injury at work. Now, this is what disability insurance concerns itself with.

Disability Insurance is also referred to as ‘Income Protection’. It is a form of insurance that insures the beneficiary’s earned income against the risk or barrier a disability might pose. However, it is probable that a disability might prevent a beneficiary from carrying out their regular duties at work. Like we established earlier, this may be due to an injury sustained [from work] or a chronic illness. Disability insurance thus fills the income gap while the beneficiary is indisposed. So, yes, it also encompasses paid sick leave.

Is buying this cover worth it? We shall examine a few reasons to justify its position. Just before that, however, we shall consider its basic types.

What is Disability insurance?

Disability insurance is a type of insurance that helps you cover your essential expenses if you become disabled. Basically, there are two types of disability insurance which include short-term and long-term disability insurance. The major difference is that short-term disability insurance starts faster than long-term disability insurance.

Experts from the Council for Disability Awareness stated that some common causes of short-term disability claims include:

1. Digestive disorders

2. Musculoskeletal disorders

3. Pregnancy

4. Mental health issues and injuries

On the other hand, most long-term disability claims stem from cancer, mental health issues as well as pregnancy. Disability insurance serves as a backup if you need to keep up with your expenses while recovering from an injury.

Is disability insurance a good idea?

Yes, having Disability insurance is a great idea especially for surgeons, masseuses, or manual laborers. Basically, if your profession makes you prone to injury, you should consider investing in one. More importantly, if you are the breadwinner in your family, you definitely should invest in disability Insurance to secure the finance of your family should something happen to you.

What are the Basic Types of Disability Insurance?

There are two basic kinds of Disability Insurance which include Short Term Disability Insurance and Long Term Disability Insurance. Like one can infer from their titles, the difference lies in their duration. This feature is synonymous with the types of life insurance; Term Life and Universal Life Insurance.

1. Short Term Disability Insurance

This Disability Insurance policy offers an employee a portion of their salary if they are unable to work for a short period. However, this lasts between three to six months.

2. Long Term Disability Insurance

This Disability Insurance policy offers an employee a portion of their salary if they are unable to work for a longer period. However, this lasts for a period of over six months.

Both short term and long term disability policies have a period of ‘disability’ that defines eligibility to benefits. This ‘disability period’ is referred to as ‘elimination period’. If a person becomes disabled, they must wait until the expiration of the elimination period before they start receiving benefits. If they are able to work before the expiration of the elimination period, such a beneficiary will not be entitled to benefits.

Why You Should Consider Buying Disability Insurance

Here are some of the reasons a disability insurance is important:

1. You’re the breadwinner

Exactly. You’re going nowhere yet. How are your own beneficiaries going to live? Who’s going to fend for them? Okay, seriously, if you financially support your kids or parents or partner[s] as the case may be, you need to ensure they are well taken care of. Insurance policies as this cater to these emergencies; for yourself and for those who rely on you.

2. You’re paying off debt

If you’re a millennial or a Gen Zer; you’re probably in the category of those who have one outstanding debt or the other to resolve. Say you sustained an injury or developed a complication that would prevent you from going to work, how would you resolve these debts? Bills?

By and large, proportioning an amount that goes into your coverage, ensures you do not lag behind when these emergencies arise, even though they are temporary.

3. Your employer doesn’t offer enough coverage or any at all

By not offering enough coverage, it implies that you are probably running a short term disability insurance – which a number of traditional employers prefer to offer. The short-term disability insurance, however, replaces up to 50% of your monthly earnings between three to six months. What’s more, is that you might have to pay taxes on the payments.

If these policies are subject to your employment with the company -which they obviously are- you might be out of luck if your injury or illness leads to job loss. To mitigate the risks, some experts recommend buying additional long-term disability insurance for the most “comprehensive and cost-effective” coverage. A Long-term cover can effectively pick up where short-term coverage or your emergency fund leaves off. By and large, this lasts between 90 days and a year after the incident occurs.

4. You work for yourself

Disability insurance does not just appeal to office workers or career folks, or 9-5ers. The self-employed are also susceptible to injuries, aren’t they? If you belong to this category, an insurance benefit can help provide a steady income as well as cover ongoing business expenses.

For better financial security for your family, you can also opt to purchase life insurance.

Why is Disability Insurance important?

The importance of disability insurance includes the following:

1. Disability insurance replaces your income if you are injured

Jobs like manual labor makes worker very prone to injury. Most times, this injury may be so severe that your employer’s insurance will not be able to offset the bills. In situations like this, having disability insurance will save you from financial ruin. In addition, you can have a surprise injury. This could be either home accidents or even a fall off a ladder that will make you unable to work for some time.

2. It replaces your income when you are seriously sick

As stated earlier, most disability claims stem from severe illnesses like mental health issues or cancer. These illnesses are more common than you think. Some of them even result from aging. It is important for you to prepare for this beforehand because you cannot be 100% certain that it will not happen.

3. A disability insurance covers your bill while you recover

Experts from The Social Security Administration stated that about 25% of people above 20 years old will be disabled at some point before age 67. These statistics show that the chances of being disabled at least once in your lifetime are high. Therefore, having disability insurance will be of great help in the long run.

4. Disability insurance takes care of your short term and long term needs

There are two main types of disability insurance namely short-term and long-term disability insurance. Usually, short-term disability works for a duration of 6 months. Thereafter, you will need to purchase long-term disability insurance. The long-term disability insurance package has a waiting period of six months before its benefits begin. Also, the duration of your insurance will determine its price.

5. It safeguards your household from a complete loss of income

When the breadwinner of a household earns nothing because of an injury can be rough on the household’s finances. Except you have a partner that earns enough to foot the household expenses, the effects of a disability will be severe. This is why it is important to purchase disability insurance to protect you from situations like this.

As a self-employed person, you may also consider paying a higher premium each month to shorten your elimination period since you do not have short-term coverage from an employer to shield you – temporarily.