You probably insure your home, car, and other valuables. Isn’t your ability to earn a living more valuable and important then all of them combined? So let’s just think of it as paycheck insurance- an insurance policy that would provide you with a large percentage of your income in the event an illness or injury prevents you from going to work. But first, ask yourself this, if you could not go to work due to an illness or injury, how long would you be able to maintain your current lifestyle? How about just your family’s basic needs?

While most people think of disabled as getting hit by a truck, the reality is that more than 80% of disability insurance claims today are due to illness. And statistically 1 in 4 young adults today will become disabled at some point during his or her working life, according to the Social Security Administration. With odds like that…

You might, even probable. But consider this. Social Security Disability Insurance While you’re probably covered by the federal government disability insurance program, qualifying for benefits isn’t necessarily easy. According to the Social Security Administration, around 65% of applications for Social Security disability benefits were initially denied. What’s more, the average disability benefits in 2023 only average $1,489… Is that enough for your family? Workers Comp In the event your state mandates it; it will typically be automatically offered to you free of charge, but it will only cover work related injuries and illnesses. Employer Sponsored A great option for many reasons, primarily the fact that there is typically no medical underwriting making it a great option for people that are uninsurable and many times it will be free of charge. However two major cons to consider with this type of coverage is: Coverage Limitations Typically capped at a set monthly dollar amount regardless of income and benefit period limited to 24 or 48 weeks Employment Limitation Coverage is only active while at your current employment- In the event you leave your current employer, coverage terminates immediately. This can potentially leave you with none or limited options at a later stage in life and premiums higher than you could have locked in.

That’s actually great! Individual disability insurance plans are typically designed with a 60/90 day elimination period to reduce the cost of premiums. Owning a short term disability plan will allow you to take advantage of that option and help lower your cost.

While your occupation, medical history and the insurance company you end up going with might affect some of your options, Individual Disability Insurance policies are almost always customizable. These are the typical choices & options you should consider when designing your policy. The design of your policy will obviously affect the price. Benefit Amount While typically designed to replace between 40% to 65% of your pre-tax earnings, anything less than that can be customized to lower your premiums. Benefit Period The length of time you’d receive disability insurance in the event of a qualifying disability. This can range from a few months up until you reach retirement age. Elimination Period A waiting period before you qualify for benefits after suffering an injury or illness. This is typically anywhere between 30 days to 1 year. Choosing a longer elimination period will reduce your insurance cost but be mindful to choose an option that your financial situation can sustain. Own Occupation Will ensure your disability benefits when you can no longer perform the job you had when you became disabled even if you can perform any other job. A dentist who suffers a hand injury would be a typical example. Future Insurability This will allow you to increase your benefit amount (prior to a disability) when your income increases without going through additional medical underwriting. This is a great option for anyone at the beginning of their career expecting their income to increase in the future. Inflation Protection Will increases your disability insurance benefit by a specified percentage after each year of disability to help protect your lifestyle against inflation while you’re on disability claim. Residual Benefits Will pay partial disability insurance benefits if a disability reduces your income by at least 20% but you can still work somewhat. This will allow you to return to work in a diminished capacity without losing all of your insurance benefits. Catastrophic Disability Will increase your benefit amount in the event of a … disability to help account for the cost of an aide. Mental Illness Will remove the typical 2 year limitation on benefits paid in the event an illness or disability is due to an emotional issue. This is a general list but not all options will necessarily be available for all occupations and through all companies. Make sure to discuss your specific situation, occupation, and needs with a knowledgeable disability insurance specialist that can help you weigh your options.

Totally! Individual disability insurance policies typically take into account any non-passive income. This includes 1099’s, bonuses, commissions etc. Although not always true, a great rule of thumb is to calculate your benefits based on your AGI. See here for how to locate this figure on your tax return.

Although having a desk job is a pretty sure way to guarantee more options and less premiums, many other occupations easily qualify. You’ll be surprised by the diverse nature of individuals that are protected by disability insurance plans. Click here for a partial list of qualifying occupations.

As a reference point, these policies typically cost between 1%-3% of your annual income. Your age, occupation, gender, health, and hobbies will be the base cost factors. The design and options of your choice will understandably affect price too.

In many scenarios, first year and lifetime discounts may be available but tend to vary by insurance carrier and state. Savings can range anything from 5% year one to 25% lifetime so be sure to ask about them! The typical discounts are: Bundling with a life insurance policy, Purchasing at the same time as a spouse, Group (typically 3) of individuals working at the same company.

Obviously not. Most carriers have a preferred market and have built their policies, options, and discounts to best serve the needs of their target clients. So although there are many great companies out there, make sure to find the one that’s great for you.

As with any insurance product, prior to issuing a policy, the insurance company will want to evaluate your health and personal details. Depending on your individual circumstances, the application process typically takes anywhere between 1-6 weeks and will include the following Application A comprehensive application covering your basic personal information, occupation details, and lifestyle. Medical Underwriting A Short (5 min.) exam completed at your home or office on your time. Depending on the benefit amount and your medical history this can many times be waived. Financial Underwriting Basic information confirming your annual income. Typically consists of either W2’s, tax returns or both. There are many instances that these requirements can be waived with lesser benefit amounts.