Disability Insurance may be one of the most essential and most overlooked insurance coverages. When it’s time to select insurance benefits, most people think of health, dental, vision and life insurance, but are often slow to consider disability insurance.
The reality is that at least one-third of American workers will be disabled and have to miss more than 90 days of work during their careers. And more than one in four can expect a disability that will last a year or more before they reach retirement age. And the vast majority of these will not be work-related—meaning their employer’s workers’ compensation insurance won’t help them.
Being able to earn a living and take care of yourself and your family is one of your most valuable assets and the most difficult to replace. But it is perhaps the least protected of all assets. Disability insurance is the protection for your paycheck and your ability to earn a living, whether that disability lasts a few weeks, a few years or until you reach retirement age. It provides financial peace of mind for you and your loved ones in the event that you are sidelined by a serious illness or injury by protecting your future income potential.
To protect against financial hardship, anyone who earns money—whether single or married, with children or without—should consider a personal disability income insurance policy. When selecting coverage, you will want to consider the following policy features.
- Definition of disability: Some policies pay benefits if you are unable to perform the duties of your regular occupation, while others pay only if you can engage in no gainful employment at all. Understanding how a disability is defined will help you to select a policy that best suits your needs.
- Amount of income: This amount varies by policy, but a policy that pays 50 to 60 percent of your monthly salary (not including bonuses or commission) is the most common and most affordable option.
- Length of benefit period: You can choose to receive benefits that are payable from one year, two years, five years or to retirement age. Opting for coverage that lasts through age 65 affords the best protection against an injury or illness that permanently removes you from the workforce.
- Residual benefits: Selecting this feature will give you partial payment in the event that your income is reduced because you are unable to fulfill some, but not all, of your job responsibilities.
- Cost of living adjustment (COLA): Adding optional COLA to your disability policy means that the coverage you purchase today will keep up with the pace of inflation during the lifetime of the policy.
- Short-term disability policies have a waiting period of up to 14 days with a maximum benefit period of no longer than two years.
- Long-term disability policies have a waiting period of several weeks to several months, with a maximum benefit period ranging from a few years to the rest of your life
What Is Short-term Disability Insurance (STD)?
STD is a type of disability insurance coverage that can help you remain financially stable should you become injured or ill and cannot work. Usually, STD coverage begins within one to 15 days of the event causing your disability. The coverage allows you to continue to receive pay at a fixed weekly amount or a set percentage of your income.
STD typically lasts for about 10 to 26 weeks, although this varies by policy. When this STD coverage ends, long-term disability (LTD) coverage typically takes effect.
What Is Long-term Disability Insurance (LTD)?
LTD is a type of disability insurance coverage that pays employees a set percentage of their regular income after a specified waiting period. For example, if a worker is covered under short-term disability (STD) insurance as well, the LTD insurance would kick in once the STD policy is exhausted, typically after three to six months.
LTD insurance protects workers in the event they become disabled for a prolonged period prior to retirement. LTD policies are often offered through employers as part of a standard benefits package.
The length of LTD plans varies; some may be limited to a period between two and 10 years, while other plans continue paying out until age 65.
Do You Need a Supplemental Disability Insurance Policy?
While some employers offer a disability insurance policy, the policy offered by your employer may not be enough to cover your financial needs in the event of a disability. Supplemental insurance is additional coverage that can help you pay whatever expenses may not be covered by your medical plan or employer’s disability policy.
The specialists at Roper Insurance can help you with an asset and income review so you can decide whether your current disability policy is adequate, or whether you may need a supplemental policy. By working with Roper Insurance & Financial Services, we can help you select personal insurance coverage that complements your financial plan and provides the security that you need. Email us here or Call us today at (303) 721-1145 to learn more about all of our disability, life and health insurance solutions.