The Cost of Not Having Disability Insurance

Disability insurance is one of the most ignored types of insurance that people do not buy. You might think that you are in great health and do not need disability insurance. However, disaster can strike without warning. Accidents do happen that could prevent you from working. In addition, the body is unpredictable, and disease or illness could suddenly attack.

What is Disability Insurance?

Disability insurance is an insurance policy that will cover much of your salary if you are unable to work. Money is necessary to live, so this type of insurance will give you some income. It basically protects you financially if you become disabled.

Why do you Need Disability Insurance?
You do not want to think about becoming disabled, but there are a large number of people in this country who cannot work because of a disability. Having disability insurance can keep you from having severe financial hardships in the future. If you do not have disability insurance, there are many reasons as to why it could really cost you:

1. Loss of Income: Paid sick leave only goes so far. The cost of the diagnosis, treatment and recovery can be significant. You also need to make sure that you have the money to pay monthly expenses. You might have the necessary medical insurance to cover your medical bills, but the other expenses can leave you in a financial bind. When you cannot work, you will not receive any income, but your bills continue. If you have disability insurance, you will be receiving some money to help offset your loss of income.

2. Medical Expenses: Even though you might have medical insurance, the cost of heath care is increasing. Even with medical insurance, there could still be a significant cost for your treatment and recovery. You might need specialists or even physical therapy to aide in your recovery. The gas money also adds up. You will need to travel to the hospital or doctor’s office while you are recovering.

3. Miscellaneous Expenses: If you are not receiving income, you cannot do the things that you enjoy. In other words, your quality of life would decrease. You cannot go out to dinner or rent a movie. You could not spend money on your family at Christmas time or for their birthday. It would be a very boring and stressful way to live.

Types of Coverage
There are basically two types of disability insurance coverage:

•Short Term Disability: This type of disability is coverage that does not last long, usually for about a year. If you are not able to work because of a disability, you need to return to work within that year. This is usually less expensive.

•Long Term Disability: Long term disability is insurance that will take longer than a year. You have a serious problem in which you cannot recover from within 52 weeks. Long term disability insurance usually begins after your short term insurance has expired. Some employers provide short or long term disability benefits. Other employers offer it as a payment option. It is a needed benefit if you do not want to go without income because of a disability.

Advantages of Disability Insurance
Since you will not receive a paycheck from your employer, you will receive income through your disability insurance provider. You will need money to pay your monthly expenses, such as utilities, mortgage, groceries, etc. Having a paycheck could even prevent you from facing foreclosure. Normally, disability insurance is a percentage of your salary. The amount that you will receive depends on your type of insurance plan. It might be half of your income, or it could be up to 3/4 of your salary. Although it will not be all of the income that you are accustomed to receiving, it could keep your head above water during this difficult time.

Getting Disability Insurance
If your employer does not provide disability insurance, you can purchase it on your own. You need to search around to find the best options for you. An insurance quote comparison site is your best option when comparing policies. There are a few things that you need to look for when getting disability insurance:

• Get one that cannot be cancelled: This is a contract that will secure you a rate for a certain amount of time, and your provider cannot cancel it. Another non-cancelable plan is a renewable plan that does not allow your provider to drop you. However, they could raise their fees.

• Know their definition of “total disability”: There are terms, such as own occupation and any occupation that you will want your insurance company to clarify. Own occupation normally means that you will get benefits if your disability does not allow you to do the job that you were doing before your disability occurred. Any occupation means that your disability will need to be so severe that you will be unemployed and not work at all.

• Look for Insurance Riders: Make sure that you read the terms and conditions of your plan. Riders are terms put into your policy that allows you to make changes at some point in the future.

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Disability Insurance for the Small Business Owner

Even with employees, small business owners can be seen as single-person operations. No matter how much you pay someone to help you manage, market, or produce items for your small business, no one is as invested in its success and revenue generation as you are.

If you should become ill, injured or otherwise unable to work for medical reasons, you may no longer be able to contribute to the success of your business. You may also no longer be able to motivate and oversee employees, and you may not be physically capable of dedicating the time to your business that it needs. Not only will this result in the decline of your overall revenue but it will also mean that your company can no longer pay you an income. This is why all small business owners must invest in both short- and long-term disability insurance policies.

Relying on Social Security

Many individuals take for granted that Social Security disability benefits will be paid to them when they are no longer able to work and earn a paycheck for their small business, however, this is not generally the case. It is notoriously difficult to get the Social Security Administration (SSA) to approve your application for disability benefits. In addition, when relying exclusively on Social Security, you are subject to their definition of disability, their waiting period and their benefit limits.

As a small business owner, you benefit from taking the risks that all entrepreneurs accept. Your drive can directly contribute to the amount of income you’re able to take from your business. Accepting the risk of Social Security taking care of you, and limiting your disability income to Social Security levels is not an acceptable risk nor is it reflective of the actual income you could have if you have your own disability insurance policy.

The Benefits of Disability Insurance

One of most important benefits of having a disability insurance policy as a small business owner is that you can buy a policy with a looser definition of disability than the SSA allows. The SSA considers individuals to be disabled when they’re no longer able to conduct the duties of any occupation. With your individual disability insurance policy, you can choose a definition of disability that is reflective only of your ability to do the work of your current occupation.

In addition, the SSA does not cover any short-term disabilities. Your disability must last at least one year or be expected to result in death in order to qualify for benefits.

Another concern when you rely on Social Security is not only will you have to wait for your application to be approved but you must also go through the SSA’s waiting period of five months before benefit payments begin. When you buy your own disability insurance policy, you can determine what waiting period you’re comfortable with. The longer your waiting period, the lower your premium will be as a long waiting period reduces the overall amount that the disability insurance policy must pay out.

Inflation can work against the value of your disability insurance payment. A cost-of-living adjustment, or COLA, added to your disability insurance policy will adjust your benefits annually in order to keep pace with inflation.

You also get to determine your own limits when buying a disability insurance policy. You may not be able to get full income replacement from insurers but you may be able to replace up to 80 percent of your income. The closer you want your benefit to be in terms of your actual income, the higher your premium will be.

Another benefit you can add to your disability insurance policy is guaranteed insurability benefits. This will allow you to add additional insurance amounts without going through underwriting again as this benefit guarantees your continued insurability. That means as your small business income goes up, you can mirror that increase through your disability insurance policy without worrying about how your health or age might affect your rates.

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