What Does Disability Insurance Cover?
Disability Insurance Covers Up To 60% Of Your Income.
It is coverage that allows you to continue making a portion of your income when you are otherwise unable to work and continue providing for your family.
According to the Council for Disability Awareness, more than one in four millennials will spend at least a year off of work for a disabling condition before they reach retirement age.
Do you need disability coverage?
- Do you have enough money squirreled away in a savings account to cover those months of lost income?
- Do you have a solution for how you can provide for your family during this financially lean period?
Statistically, according to the Council for Disability Awareness, less than half of Americans have enough money saved to cover three months without a regular income source. So, if you answered “No” to any of the questions above, then, disability insurance should be a high priority. This way both you and your family’s well being is always at the top of your mind.
How Much Does Individual Disability Insurance Cost
As a rule of thumb, disability insurance premiums cost 1 to 3 percent of your annual gross income.
To put this into perspective, a person making around $50,000 a year in gross income will pay approximately $500 to $1,500 a year for Disability Insurance.
Even beyond the waiting and elimination periods, like with any insurance, the cost and premiums of your policy can also vary pretty widely based on a variety of pre-existing conditions:
- Lifestyle habits: Habits such as smoking, alcohol, and drug use can all affect the premiums and the level of coverage you’ll receive.
- Occupation: Higher risk jobs will lead to you paying much higher premiums.
- Existing health: If you have pre-existing health conditions, you’ll also wind up paying for it.
- Gender: Women are more likely to file disability claims than men. This means they tend to pay more for coverage.
- Income: With the income you are bringing in, the more you will ultimately pay for coverage.
Finding a disability policy may seem daunting at first, but as you find the policy type that fits your needs, the pre-existing factors you need to consider and understand the reasons why you need it, you’ll be all set.
What does Short-Term Disability cover?
Short-term disability covers you when you are out of work for a few months to a year and many employers offer this kind of coverage to their employees through their group insurance plans.
These plans generally cover 60-70% of your monthly income for the time that you’re out.
Short-Term Disability covers:
- Pregnancies (and resulting complications)
- Digestives disorders
- Injuries/broken bones
- Mental health issues
Because they aren’t meant to cover you for an extended period of time, these policies pay out a percentage of your monthly income so you aren’t negatively impacted by your inability to work. This way you’re protected whether you injure yourself doing a home improvement project or if you need to take time off for your pregnancy.
What Does Long Term Disability Insurance Cover?
Long-term disability covers you when you’re out of work from anywhere between two years up to retirement age. These plans are rarely offered by employers and needs to be purchased independently like life insurance. In the event an employer does provide this, you often still have to find your own supplemental coverage. These policies can cover up to 60% of your gross monthly income, although you are better served to invest somewhere between 1-3% of your yearly salary.
The two main types of long-term disability insurance are own occupation and any occupation:
- An own-occupation policy goes into effect when an insured can’t perform the job they were specifically trained to do.
- An any-occupation policy applies to situations where an insured is unable to work at any job, taking their level of education, experience, and age into consideration.
Less than half of Americans have the discretionary income set aside to cover three months of expense if they’re without an income source, let alone possibly being out of work for years due to a chronic or life-altering condition.
The leading causes of long-term disability are:
- Muscle/Joint Issues (Arthritis)
- Mental Health Issues
- Cardiovascular Issues
- Injuries
- Cancer
These are situations that can threaten both your own and your family’s livelihood. The causes are more common than some might have you believe, so it’s key that you educate yourself about the ins and outs of long-term disability, so you can protect both you and your family to the fullest extent.
