If some unexpected accident happened tomorrow, or you suddenly came down with some serious illness that forced you to put work on hold, how would you pay your bills? For many, it wouldn't be easy. Luckily, that's what disability insurance is for.
It pays out a percentage of your salary to help replace your monthly income. That kind of protection sounds pretty pricey, but luckily, it's pretty reasonable. And with an independent insurance agent, you know you'll be getting the right price and coverage.
Independent insurance agents work with multiple carriers, which means they can bring a bunch of different quotes to the table all at once. They'll help walk you through each and every one to find the perfect blend of protection and price for your needs.
But there are a lot of different factors that go into how your rates are determined, so first you should know a little background.
What Is Disability Insurance?
Someone once said if you’re not sure where to start, start at the beginning. And it’s a good thing to know what disability insurance is before getting into the nitty-gritty of the costs.
Simply put, disability insurance replaces your lost income due to a disability, illness or injury, normally covering between 40% and 70% of your salary. There are several different types of disability insurance that may apply to you, like:
- Individual long-term disability insurance: This coverage handles long-term injuries, disabilities, and illnesses. These disabilities or illnesses keep you from working and are not to be confused with work-related injuries or illnesses. Coverage lasts years, and sometimes decades, depending on your benefits.
- Individual short-term disability insurance: Just like long-term disability insurance, short-term also covers injuries, disabilities, and illnesses that keep you from working. Instead of lasting years, this coverage only lasts for days or months, hence the title short-term.
- Group long-term disability insurance: Group long-term is offered through your employer. You can choose to participate in group coverage or opt out. This policy is offered to all eligible employees at your work and is the kind of disability coverage that lasts for years. Health risk factors are not accounted for since it is rated on a group basis, which is a huge plus.
- Group short-term disability insurance: This group disability coverage is just like group long-term insurance in the sense that it is offered through your employer and covers disabilities, illnesses, and injuries. Again, it is offered to all eligible employees and you may choose to opt out if you so desire. Health risk factors are still not accounted for on this disability policy type and your employer normally pays for this coverage.
Government-backed disability programs:
- Social Security Disability Insurance: This is offered by the federal government and is a federally funded disability benefits program. Sounds like a big deal doesn't it?
- State disability programs: State disability programs are in just a few states across the country and offer temporary disability insurance.
For this article, though, everything will be focused on individual short-term disability insurance, the kind you get outside of your employer that can last up to twelve months.
Why Is Individual Short-Term Disability Insurance Important?
Well, because accidents happen and no one ever expects the unexpected. It's safe to say that the majority of folks out there depend on their income to maintain their lives. And if you can't work due to a disability or illness, you still need some sort of cash to come in, because those bills aren't going to just go away.
With disability insurance, a percentage of your salary is paid out to you to serve as income replacement and keep those bills at bay.
So really any disability insurance is important to have. Many employers offer some sort of group disability, but there are often holes in coverage and limitations, which is why an individual policy should often enter the mix, to help keep you going strong.
Of course, many who have group disability don't know about their potential coverage gaps and just assume it's good enough, but an independent insurance agent can take a look at your existing coverage and help find you the right mix of protection to prep for the unthinkable.
Another important factor to consider is if you have long-term disability insurance, there's what's called an elimination period, which is the time between the injury or diagnosis and your payout. In some cases, it can be a few months before you're paid out any sort of money for bills.
This is where a short-term policy can help close up that period where you aren't bringing in any money.
How Much Does Short-Term Disability Cost?
Depends. It's different for everyone. Disability insurance costs relate to a number of factors that are pooled together to decide your rates, like:
- Your overall benefit period
- Your age
- Your health
- Your salary
- Your coverage amount (based on a percentage of your income)
The good news is, some of these factors can be played around with to help raise your benefits, and adjusting some can help you lower your rates. An independent insurance agent can help walk you through your options to find the perfect blend of coverage and cost.
How Can I Lower My Short-Term Disability Insurance Premiums?
When it comes to getting the right price, one of the easiest factors to adjust is your coverage amount. It is based on a percentage of your income, so if you change it from 60% of your income to 45%, you'll see a significant rate reduction. Just make sure that the lower payments still work with your budget.
The benefit period also has a major impact on premium costs. Short-term disability policies don't have a long benefit period, but it can still be shortened. Your benefit period for a short-term disability policy could be 3 months. You could save money by opting to have a benefit period of 6 weeks.
When you work with your independent insurance agent, they can help you get the best price while still maintaining the coverage you need.
How to Pay for Short-Term Disability Insurance
Unlike group disability insurance that you get through your employer, you'll pay individual premiums directly to your carrier or independent insurance agent.
When you sign your contract, you decide how often you want to make payments, whether it's monthly, quarterly, or annually. Payments will then be automatically withdrawn from your bank account or paid online — your call.
Depending on the company, you could change your payment schedule, like switching from paying monthly to annually. The insurance company will readjust premium payments accordingly.
Purchasing Short-Term Disability Insurance
With an individual short-term policy, the easiest way to get protected is through an independent insurance agent who can offer way more convenience and flexibility. Instead of having a limited policy, you'll be able to create a policy with an agent that's tailored to your specific needs and financial situation.
And the process is simple. When you meet with an agent, you'll tell them all about yourself, your goals, and any concerns for the future. From there, they'll start the research and pull in quotes from all sorts of providers they think would be a good fit for your situation.
Once the quotes are in, they'll walk you through every one of them and explain anything you don't understand. Once you've made your decision, you'll sign some papers, arrange payment, and — BOOM — you're all set.
Compare Short-Term Disability Insurance Quotes with an Independent Insurance Agent
Your time is valuable, so why waste it by trying to go through the disability insurance process yourself? Expert independent insurance agents will help you determine what type of coverage makes the most sense for you.
Independent insurance agents stay on top of the industry and all the latest discounts so you don't have to. That means they'll help find the perfect amount of coverage at the best price.
They don't just help with the initial stage of obtaining coverage, either. If you ever become physically unable to work, they will be there to assist you. Now that's assistance at it's finest.
TrustedChoice.com Article | Reviewed by Paul Martin
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2017 Disability Status Report