Disability Insurance

Sometimes life events can interfere with your work: if you should suddenly become disabled it could immediately affect your ability to gain an income. Further, without an income to rely on you and/or you and your family could wind up financially devastated. Instead of constantly worrying about the possibility of financial ruin in the event of a disability, many employed workers have disability insurance that will cover them if they have become disabled. As well, it is not uncommon for people to invest in additional protection: it is always wise to plan ahead, especially if one wants to protect themselves from financial complications in the future.

A regular income is clearly necessary for survival and there really is no getting around that fact. Yet, a sudden illness or injury can create a significant problem in maintaining that income. The solution: a disability insurance policy is a plan that will help a disabled worker to keep a large part of their income intact during the time that they cannot work.

Imagine suddenly becoming too ill to work or injuring yourself so badly that you couldn’t work for several months. What would you do? If you are married and your spouse works, you may be able to rely on a singular income, but your finances are certainly going to suffer. What about your savings account? You will be surprised to see how quickly your savings account dwindles away when you are not actively working.

Now consider your finances: you have to buy food every month; you may have a house or car payment; insurance payments; and finally, if you have children, consider all of their financial needs. How do you plan to pay for everything with no income or only half the normal income coming into your household? Insurance disability coverage makes it possible for you and your family to maintain the lifestyle you were all accustomed to before your injury or illness.

If you like a good gamble, you can take up playing cards and visit a casino, but if you want financial security, an insurance disability plan is a must. While many individuals may be concerned about whether or not disability insurance costs are really worth the money spent, it only takes one time to become disabled and to understand the true benefit of having a plan in place. Without a disability insurance plan, the financial struggle that one experiences can be truly horrific, and in extreme cases, can result in the loss of one’s car or home.

Don’t let your current good health fool you: you can become ill or get injured at any time. In fact, as you age, the possibility for illness or injury increases: by the time you are 40, there is actually a 40 percent chance that you will have an illness or injury, one that will require your reliance on disability insurance. Such statistics are alarming and can serve as a wake up call for anyone who believes that disability insurance is an unnecessary form of financial protection.

Some individuals fool themselves into believing they already have adequate financial protection in place in the event of a disability. Many workers falsely believe that the coverage provided by an employer is going to be adequate or that their savings will get them through hard times. Such beliefs are financially hazardous; first, one must consider whether or not the employer’s disability insurance is too restrictive, and secondly, one’s currents savings will disappear rapidly when there is no income to replace depleting funds.

Consider the following scenario: if you make 40,000 dollars a year and you save 10 percent of your income for 2 years, given bank interest, you’ll have a little more than 8,000 dollars in your savings account (this calculation does not include alternative investments). Now, imagine becoming ill so that you cannot work. You will see your savings disappear for car payments, groceries, house payments, and whatever else your family needs. If you spent 1500 dollars a month just to survive and make the regular bill payments you are responsible for, how long will that money last? Even worse, if and when you do return to work, your savings will be depleted and will have to be replenished.

The whole idea behind establishing a disability insurance plan is to keep you and your family financially secure during unexpected hard times. Some people falsely belief that there are already plans in place that will keep them protected when they become ill or injured. First, people belief that Worker’s Compensation will cover them during injury or illness. The truth of the matter is that is not always the case. First, an injury or illness will have to be job related in order for the insurance to cover the health issue. Further, if the employee is going to receive payments from Worker’s Compensation they are going to have to prove to a court that the injury or illness is job related. Meanwhile, the case can take months, even year’s to be determined and there will not be income coming in during the process. Finally, if the injury or illness is not job related, the issue is not covered by Worker’s Compensation insurance at all.

Other people believe that Social Security Disability Plans will help them financially if they are ill and/or injured. Again, this is not always the case. Did you know that the majority of people that apply for Social Security disability are denied when they first apply? That means that you will have to appeal, a process that can take years—meanwhile, no income protection is in place. Further, the laws surrounding Social Security disability are restrictive; a disability will have to fit into such restrictions if payments are ever going to be received.

Considering such facts, having disability insurance is a no-brainer. The disability insurance costs are not something one should worry about. Rather, not having insurance in place should be the foremost concern.

If you have made the decision to get an insurance disability plan in place than you have made a wise decision. All the same, there are a few things you will need to know about disability insurance policies. To begin with, disability insurance policies have a language all their own: you will need to fully understand the policy if you are to derive any benefits from it. One of the primary issues you will need to be concerned with is how a disability is defined. Different policies will have different wording, describing what a qualifying disability is. You will need to be clear about the definition if you are to understand how the policy will serve you.

Understanding the type of disability insurance you have is critical: if you don’t understand the policy it is time to start asking the disability insurance companies some questions. Disability insurance companies have trained and highly qualified representatives that can clarify any issues that you don’t understand about the policy you are considering. A disability insurance policy does you no good whatsoever if you don’t understand the policy. In order to understand the different disability insurance terms and jargon, you might want to become familiar with the insurance industries language. The Internet is a good place to begin your research: by simply viewing one or two glossaries, often offered by disability insurance websites, you can begin to understand all of the terminology you will encounter when reviewing disability insurance policies.

Even if you elect not to research disability insurance lingo, there are still some terms you will need to know. The first term you should acquaint yourself with is an “elimination period”. Why is the term “elimination period” so important to you? In truth, an elimination period refers to a period of time that you do not get any benefits from the disability policy at all. Further, the “elimination period” is a length of time that many policies include. Essentially, this is the time when you are responsible for whatever out-of-pocket expenses arise. What’s more, you will need to realize that different disability insurance policies have different elimination periods, ranging from 90 to 365 days or more. Finally, the fewer days the elimination period is, the more money you ultimately pay for the policy all together.

Now why is this term so important to you? You will need to make sure that you have enough in your savings to get you through the elimination period. For example, if you have an elimination period that is 90 days, that means you are going to have enough money in your savings to pay for 90 days, or three months worth of expenses. Also consider the fact that you will need to have enough money for out-of-pocket medical expenses in addition to regular living expenses when you perform your savings calculations.

Another term that you will need to understand is the term “monthly benefit earned income”. Some people have money coming in from sources other than their employment; for example, someone may have regular dividends on an investment or regular rental payments coming in from a real estate venture. Disability payments are determined based on “earned income” through work only. This means that your policy will need to help you try to recover some of your wages while you are not working.

Even if you run a small business or if you are a sole proprietor of a business, you are going to have to establish your own disability insurance. Some employees have disability insurance in place and can purchase additional insurance, but you will be solely responsible for your financial situation, now and in the future. Small business owners do not face lower risks in terms of injury or illness: financial catastrophe can occur to anyone at anytime. Being prepared can help ensure some sense of financial security.

In addition to a disability insurance policy, you are going to want to invest in an overhead expense policy to protect your business. Both policies are equally vital to the small business owner: one protects the small business owner, the other the business. What’s nice about such policies is that the small business owner will find that some of the payments are tax-deductible.

If you are a small business owner with employees, you may be required by law to have disability coverage for your employees. You may want to give employees additional coverage: in doing so, you will be providing the employee with job perks that will secure their loyalty to your business and lower employee turn over rates Also, business established under a partnership still need disability plans in place, and both partners need to be covered. If one of the partners can no longer work, the plan may provide funding so that the partner can be bought out.

By now you fully understand that there are a variety of disability insurance policies and disability insurance companies. You also understand that the policy will ultimately determine the disability insurance costs. First, as mentioned earlier, the elimination period that is defined within the policy will determine how long you will be expected to be responsible for out of pocket expenses. It also defines the premium: the more time that you are responsible for out of pocket expenses, the less you pay for disability insurance costs throughout the year. Most policies have elimination periods that are right around 90 days or three months, but some disability insurance companies allow for you to have longer elimination periods. If you can afford the out of pocket expenses for a longer period, you can reduce your yearly disability insurance costs.

Expect to pay three to five percent of your annual income to meet disability insurance costs. Of course, the lower the premium you pay the less the percentage is. There are myriad ways to lower disability insurance costs and you should speak to disability insurance representatives about special deduction: they may have some surprising offers for you.

Regardless of whether you have insurance in place or not plan ahead. Start saving money in the event something should happen to you or your spouse. You are going to want to have a nest egg to rely on to get you through difficult times. The last thing you want to have to worry about is your finances when you are ill or injured. Having a savings plan and a good disability insurance policy in place can ensure that you focus on your main concern: recovering.

Worrying about how your going to pay bills will cause you stress and stress can actually hinder the amount of time it takes for you to recover. Studies have proven that stress has baneful effects on the immune system and can actually lead to dangerous diseases like heart disease. Further, when you are completely stressed out from financial problems, you are not getting the vital rest one needs during the healing process. Thus, having an insurance plan in place is not only wise: it’s the key to a quick, financially stress-free recovery.

Establish a savings account that will get you through at least six months of illness. You should put enough money away to cover the basic needs of your family. Consider the cost of your home payments, the car payment if you have one, the cost of the utilities (electric bill, phone bill, gas, heat, lighting, water); and also include extra money for luxuries like cable television. Don’t forget to calculate the cost of food and clothing into your figures. Also, you will want to include the cost of out of pocket medical expenses and medications.

Just as you should understand the disability insurance policy you have, you should familiarize yourself with the claims process. Make filing a claim as stress free as possible. Does the disability insurance company allow you to file a claim via postal service, telephone, electronically online or are all of the options available? What kind of documentation are you going to be required to have? Before you begin filling out forms, take a quick review of your current policy. Make sure that you still understand the guidelines provided.

Don’t wait around to file your claim: if you become disabled, file your claim immediately. The faster you file your claim, the faster you will be processed and receive benefits. Not acting quickly and responsible can end up in the refusal of benefits you rightly deserve and could have had if you had filed promptly.

Start taking notes if you become disabled: write down everything. Include information about the disability, your expected recovery, what doctors you saw and when, and any communication you have with the insurance carrier. Date and document everything. Back up your documentation. Good notes are vital if a dispute about disability payments arises.