The Pros & Cons Of Disability Insurance
Like all kinds of insurance, disability insurance has its benefits and drawbacks, which depend on a number of factors.
At its core, disability insurance is designed to protect one of your greatest financial assetsyour earning potential. With the right policy in place, you and your family will have peace of mind knowing that should you experience a disability that prevents you from doing your job, your income, other assets, and living standards will be protected. Without disability insurance, your family could quickly accumulate debt, default on loans, or experience bankruptcy in the event of an accident or illness. In fact, disability is one of the leading causes of foreclosure and bankruptcy in the U.S.
The biggest downside to disability insurance is cost. The reason disability policies cost so much is that there is a high likelihood that the company will need to cover a claim. Most people arent aware of this, but about 25% of U.S. adults have some type of disability.
Another downside to disability insurance is the elimination period, also known as the waiting period, which functions like a deductible. For short-term disability policies, the elimination period is usually two weeks, but for long-term policies, elimination periods can be months long or more. Depending on your financial situation, you will want to make sure that you have enough money saved to cover expenses during the period in which the policy will not pay out benefits.
What Does Individual Short
- Short-term disability benefits help replace wages lost because of illness or injury.
- Most non-work-related injuries are covered.
- Illnesses can include cancer, heart disease, diabetes, or a stroke.
- Injuries can include back trauma, joint disorders, and arthritis.
- You may be able to extend your maternity leave with an individual policy if you have complications during pregnancy or birth.
- Cost is based on age, gender, job, and any preexisting conditions.
- Payouts are based on your income and whether you work part-time or full time.
- The definition of disability varies by insurer.
- You may receive a partial benefit if you return to work part time while you finish healing.
Weve based our selections on company financials, National Association of Insurance Commissioners rankings, claims histories, and insights from several industry experts. All five of our top short-term disability insurance companies offer impressive NAIC complaint ratios as well strong financial rankings.
*Ratings effective 12/5/19. NAICs national-average benchmark complaint ratio is 1.0.
What To Look For In A Long
Base policy details
First, look at all the base policy details. This includes the:
Elimination period or waiting period: How long you must wait before the insurer pays a benefit
Benefit period: How long the benefit will last
Policy’s disability qualifications: Some disability companies, like Principal or The Standard are better for covering mental health, for example.
Partial benefits: If you qualify when you’re still able to do some work
Built-in policy features
Next, look at the built-in policy features. These are subject to availability based on your personal profile, but are standard across most insurance companies. Policy features include:
Survivor benefit or death benefit
Finally, consider what disability riders are available. Some disability insurance companies may have a greater variety than others to help extend your coverage and customize a disability policy for your situation. For example, Ameritas has a built-in rider for good health that can reduce your elimination period.
How Do I Get Individual Disability Insurance
If youre self-employed, your employer doesnt offer disability insurance, or you want to supplement the policy your employers do offer, you can apply for an individual disability policy. Individual disability insurance elimination and benefit periods may differ from group disability insurance plans, but a financial representative can help you choose the right coverage for your situation. If youd like some help understanding what type of coverage makes sense for you and applying for a policy, get in touch with a financial representative who can help you make a decision.
If youre not ready to speak to a financial representative, but youre curious how individual disability insurance would fit into your financial plan, get a free quote now.
Individual disability income products underwritten and issued by Berkshire Life Insurance Company of America , Pittsfield, MA. BLICOA is a wholly owned stock subsidiary of The Guardian Life Insurance Company of America , New York, NY. Product provisions and availability may vary by state.
Links to external sites are provided for your convenience in locating related information and services. Guardian, its subsidiaries, agents and employees expressly disclaim any responsibility for and do not maintain, control, recommend, or endorse third-party sites, organizations, products, or services and make no representation as to the completeness, suitability, or quality thereof.
Most Important Factors When Purchasing Disability Insurance
Where short-term disability coverage is typically offered through an employer and usually only lasts for 3 to 6 months or up to one year, long-term disability coverage can last for anywhere from two years to retirement age.
Another type of disability insurance called mortgage disability insurance, or mortgage payment protection insurance, kicks in to cover your mortgage payments if you cannot work due to an injury or disability.
Supplemental disability insurance is a type of coverage you can buy to fill the gap between your employers disability coverage and your true financial needs. Supplemental disability policies youve probably heard of include those from Aflac.
Before you shop for a disability policy, make sure you understand what kind of coverage you already have through an employer . If your employer offers robust short-term and long-term disability coverage, you may only need a supplemental policy or mortgage disability insurance.
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What Illnesses Qualify For Short
Sa El, a licensed agent, and co-founder of Simply Insurance, says illness coverage varies widely from one provider to the next and from one policy to the next. He suggests scrutinizing fine print to determine what qualifies.
Most people don’t understand that sickness causes the highest amount of disability, not accidents. If you get disabled due to sickness, no money will be coming in because you aren’t working, says El.
Additionally, he adds, if there is a history of serious illness in your family, consider adding an accelerated death benefit rider to your life insurance policy to help offset the heavy costs of treating a serious, potentially fatal illness.
Should You Get Disability Insurance
Consider what would happen to you and your family if you were hurt and couldnt go to work tomorrow. Do you have savings or other insurance that could cover you? Your circumstances dictate to some extent whether or not you should get disability insurance.
If you can afford it, and especially if youre the familys primary income earner, its worthwhile to have the peace of mind that some of your income is protected.
However, you should also think about your specific occupation. If youre someone who works standing, even a sprained ankle could prevent you from working. If, however, youre someone who works from home, at a computer, theres a considerably smaller chance you could be disabled to the extent you couldnt work at all.
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Assurity Is One Of The Most Popular Choices For Disability Insurance
This article will cover the basics of disability insurance and the best disability insurance companies. Plans vary but typically 5 years to retirement age. The personal disability insurance companies list is comprised of top disability insurance companies offering the best short term disability insurance or best long term.
Best For Family Medical Leave: Breeze
No option to choose your elimination period
Not available in California or New York
If you add Breezes family care rider, which is a low-cost endorsement, you can get coverage for up to 3 months in unpaid leave for regular childbirth, adoption, or the care of a family member. That said, 1099 workers are only eligible for the childbirth benefit. Most other individual short-term disability providers we reviewed exclude normal pregnancy, although Mutual of Omaha provides up to six weeks of benefits. You can also get a quote and apply for a policy with Breeze entirely online.
Breeze only offers up to $1,000 in weekly benefits, so higher income individuals may want to choose another company. And Breezes premiums are more costly than Havens for comparable coverage, but you have the option to get an accident-only policy from Breeze at a fraction of the cost. You cant choose your elimination period. However, you can select a 13-week benefit period, which comes with a 14-day elimination period or a 26-week, one-year, or two-year benefit period, which comes with a 30-day elimination period.
Breeze policies are underwritten by Assurity, which has an A- financial strength rating with AM Best. Policies are currently not available in New York or California.
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Best For Own Occupation: Assurity
Some disability policies only pay benefits if you cant work in any suitable occupation. Assurity offers own occupation coverage, which means it pays benefits if you cant work in your occupation due to a disability. If you cant work in your regular job, but you could work in another one, you can still receive benefits for up to 2 years.
It also pays partial benefits if you can return to work part-time. You can tailor your benefits to your budget. Assurity has been in business for almost 130 years, which shows stability.
- Age Requirementssecurely through Assurity | Life’s website
Guardian: Strongest Financial Standing
To enhance its standard individual short-term disability coverage, Guardian offers a variety of policies that may appeal to entrepreneurs. For instance, it extends special disability coverage to business owners and even offers Key Person coverage. This coverage helps small business owners sleep at night knowing protection is in place should a VIP become disabled.
Small business owners may also appreciate the fact that Guardian has been in operation for more than 155 years and thatYoYits financials are in good standing. However, policyholders should know the Guardian claims process can be slow compared to other providers. Routine claims take about four days to process, and more advanced claims can take up to seven days to process.
- May need documentation
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What Does Disability Insurance Cost
As with any insurance policy, the cost for disability insurance policies vary widely based on the type of coverage purchased, benefits selected, your age, your income, your occupational risk class, and even the elimination period chosen.
In our research, we found that $5,000 in monthly disability insurance coverage for a 35-year-old female could run anywhere from $95 to $290 per month. Your own experiencebased on your own preferences and personal detailsmay differ.
Best For Affordability: State Farm
Need to contact an agent to sign up
Benefit limit of $3,000 a month is lower than what some other companies offer
May not provide adequate support for people with longer-term illnesses and injuries
With an A++ AM Best rating and service in 47 different states , State Farm is one of the most popular insurance brands on the market. However, many of its existing customers don’t know about its short-term disability coverage or how affordable it is.
In general, State Farm offers $300-$3,000 a month in short-term disability insurance, and the benefit period lasts up to three years. The website does not provide specific information about premiums and plan benefits, but State Farm is transparent about which pre-existing conditions it will not cover which include addiction, cosmetic surgery, and mental and nervous disorders.
If you want to get a quote from State Farm and/or sign up for a plan, youll need to speak with a local agent. An agent can discuss your elimination period timeline and advise you about add-on benefits. After you’ve registered with a State Farm agent, however, you can simply log in to the State Farm website to manage your account info, pay your bills, or update your contact info,
Your plan will vary depending on your income and location. As an example, a 28-year-old Floridian woman who earns $24,000 and doesnt have any preexisting health conditions can expect to pay $13 a month. She would receive around $600 a month in disability benefits.
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Why You May Need Disability Insurance
When youre relatively young or healthy, its easy to believe you dont need any amount of disability coverage. Youre practically invincible, right? Unfortunately, this kind of thinking leaves millions of Americans in financial peril year after year, mostly because they do not have any sort of safety net when a major illness or injury occurs.
To be clear, not having disability insurance can lead to catastrophic consequences for your family if you find yourself unable to work. Without a paycheck coming in, its likely you would struggle to pay bills and keep food on the table, and you could even lose your home. If you had a spouse or partner, they could be designated as the sole provider for your household going forward, which may or may not be realistic at all.
Unfortunately, disability occurs more often than one might think. According to the Council for Disability Awareness, more than 25 percent of todays 20-year-olds can expect to be unable to work for at least one year due to an injury or illness before they reach retirement age. Further, 5.6 percent of American workers will have some sort of short-term disability in any given year, with almost all of the most common situations being non-occupational in origin.
Best For Coverage After Age : Mutual Of Omaha Insurance Company
Mutual of Omaha Insurance Company offers the potential though not the guarantee of coverage up to age 75, as long as you continue to work full-time and pay premiums.
Mutual of Omaha does reserve the right to cancel your policy after age 67. But its golden-years coverage is still unusual and welcome.
How Much Does Short
Most providers pay 60% of the pre-disability wage. However, some policies do offer a higher percentage. Conversely, some providers may pay to replace only 40%50% of your pre-disability wage, so be sure to find a policy that can keep you and your dependents afloat in case of an accident or illness.
Also, keep in mind, many policies pay a reduced benefit if you are collecting from other income sources, such as Social Security disability benefits and/or workers compensation.
So, make sure there is a minimum benefit provision to help protect you. A minimum benefit provision pays you a flat amount regardless of Social Security and other income sources.
How Much Does Long
To reap the benefits of long-term disability insurance, you must pay a monthly premium. We found that average premiums represented between 0.5% and 2% of gross annual income.
Various factors affect the cost of long-term disability insurance. These include the plans coverage, monthly benefit amount, occupation, and if you have pre-existing health issues.
In contrast to life insurance, men usually pay less for disability insurance, since women file claims for pregnancy. Younger people typically pay less as health tends to decline as you age, meaning that illnesses and injuries are more common. Behaviors such as smoking and drinking also can affect cost.
Read Also: Va Disability Percentage By Condition
How We Chose The Best Disability Insurance Companies
We analyzed 12 insurance companies before deciding on our picks for each of the five categories. We considered factors that included the plans offered, options, premium costs, how quickly coverage would begin, how simple it was to get a quote, and the ease of purchasing a policy.
Because a solid history of client satisfaction and financial stability are essential, we also reviewed data from the NAIC, BBB, and AM Best before determining the best disability insurance providers.
Maskot / Getty Image
Best For Noncancelable: The Standard
The Standard offers short- and long-term disability income insurance options with a slew of benefits, including optional noncancelable coverage. It also offers an exclusive family care benefit that can be used more than once and protects you if you need to care for a family member with a serious health condition.
Both short- and long-term disability options available
Family care benefit when you take care of sick family members
Policy features include rehabilitation and survivor benefits
Optional student loan payment rider available
Covers up to 66.67% of your income before adding additional rider benefits
The noncancelable feature is an optional rider
Individual disability coverage not available in Wyoming
Elimination periods start at 60 days
Founded in 1906, The Standard has been providing insurance coverage to Americans for more than a century. The company offers a few different insurance products, including both long- and short-term coverage for groups and coverage for individuals. The Standard holds an AM Best financial strength rating of A , and it was one of the first insurers to implement a waiver of premium on a policy.
You can easily get an estimated quote for coverage through The Standards website. However, if you are ready to purchase coverage, youll need to speak with one of their agents directly. A medical exam may also be required in order to finalize your policy.
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What Is The Difference Between Short
The Family and Medical Leave Act is a helpful regulation that allows employees to take leave if they are ill, injured, or need to care for a family member, without fear of losing their job in the process. FMLA is not paid leave, however, and only protects your position at your place of work for up to 12 weeks.
On the other hand, short-term disability insurance does provide paid coverage if you need to take leave due to an injury or illness. The exact financial coverage and benefit period that your short-term disability coverage will offer depends on the exact policy you purchase.