Have you ever worried about how you’d make ends meet if you couldn’t work? If you don’t have a cushy emergency fund to fall back on, having disability insurance is a simple solution for more peace of mind.
Disability is a type of insurance designed to replace the income you’d miss if you were unable to work due to a covered illness, injury or accident. Here are 6 facts you should know about disability insurance:
1. Disability statistics tell a story.
Did you know that more than one in four 20-year-olds will become disabled before they retire? According to the Council for Disability Awareness, some of the most common reasons for disability include back injuries, cancer, heart disease and other serious illnesses.
When a long-term disability occurs, the average absence from work is almost three years. Without a paycheck, most workers would feel a financial pinch right away.
2. Disability benefits can be used for any expenses.
Disability insurance is never required — but it’s wise to have. It allows you to receive a portion of your gross income (such as 60%) that you can spend any way you like.
For instance, you could use disability benefits to pay a mortgage, rent, everyday expenses or credit card payments. Remember that health insurance only covers a portion of your medical bills — not your living expenses if you can’t work while you’re recuperating.
3. Disability insurance is for all workers.
You don’t need a high income to be a candidate for disability insurance. Coverage is suitable for anyone who relies on his or her income to pay living expenses, such as bills, housing and food.
Plus, having an illness or injury could mean having medical bills or other unforeseen expenses. For these reasons, just about anyone who works should have a disability policy, whether you’re single, married or have children.
4. You can purchase your own disability insurance.
Getting a disability policy at work is a terrific benefit. “Take advantage of any guaranteed issue offers to purchase insurance as a new employee,” says Ashley Shope, assistant vice president, Product and Market Development for Unum. “When you’re hired, you typically get some amount of coverage with no qualifying medical questions.”
But if you don’t have that option (or if you do but the coverage isn’t sufficient), you may be able to purchase disability coverage on your own. In general, your health status will be a factor in the premiums charged for an individual disability policy. But having your own coverage gives you flexibility because it typically stays with you if you change jobs.
5. There are different types of disability insurance.
The two main types of disability policies are short-term disability and long-term disability. You can have both types to make sure you’re covered no matter how long you’re away from work.
Short-term policies typically have a waiting period of up to 14 days and pay a maximum benefit for no more than two years. Long-term policies have a waiting period up to several months with a benefit that can last for the rest of your life.
6. Disability insurance comes with different protection features.
There are a variety of additional options you may be able to purchase at an additional cost with your disability insurance policy:
• Guaranteed renewable allows you to renew a policy with the same benefits. However, the premium could increase.
• Noncancelable gives you the right to renew a policy with the same benefits without a premium increase.
• Cost of living adjustment increases your benefits over time based on the Consumer Price Index.
• Return of premium requires that you receive a partial refund of your premium if no claims are made during a certain period.
• Waiver of premium allows you to stop paying premiums after being disabled for a certain period.
Compare the cost of different disability options so you understand the value they provide over time. Shope offers important advice: “It’s important to consider insurance products that lock in your premiums, so you don’t have to worry about rates increasing as you age.”