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What is dis­abil­i­ty insur­ance and is it worth it? 

Protecting your income could cost you less than a meal out.

What’s your most important asset? Is it your home? Is it your car, or perhaps what you’ve saved away in bank accounts and your 401(k)?

Actually, it’s none of the above. Your most important asset is your ability to earn an income.

So, imagine for a moment you suffer an injury. Or you develop a severe illness. Either way, it prevents you from earning your paycheck for an extended period of time. Would you be able to continue paying your mortgage? What about your car payments – would you be able to afford them anymore? Would your family be able to make ends meet?

The good news is there’s a solution out there: it’s called disability insurance. Think of it as protection for your paycheck. It’s an insurance policy that provides money if, in the future, you can’t work due to an injury or illness.

Watch this one-minute video to learn more about disability insurance.

Read on to learn more about:

  • What is disability insurance?
  • How does disability insurance work?
  • How much disability insurance do I need?
  • How much does disability insurance cost?
  • Who needs disability insurance?
  • How do I get disability insurance?

What is disability insurance?

Disability insurance, also known as income protection insurance, will pay you some of your income if you can’t work for a period of time because of an injury or illness. We say “some of” because disability insurance is not meant to fully replace your income. Instead, it acts as a partial replacement until you’re ready to return to work.

Disability insurance helps by replacing some of your lost income so you can continue to pay your mortgage, utilities, childcare and other everyday expenses. The money from your disability insurance policy can also help you avoid draining your savings or retirement accounts. When you’re too sick or injured to work, it pays you a monthly cash benefit.

How does disability insurance work?

No one wants to think about being injured or diagnosed with an illness so severe that it leaves them out of work and out of a paycheck – but it could happen. The important thing is to be prepared. If something happens and you can no longer perform your job duties for a period of time, disability insurance can help. And if you have a policy, getting paid can actually be quite simple. Here’s how it typically works if you already have a policy in place:

  1. You submit your claim to your insurance provider.
  2. After your predetermined elimination period, you’ll receive a monthly benefit amount.
  3. This amount is based on the benefit period you chose when you applied.

Are those terms new to you? They are for most people, so here’s what you need to know:

  • Elimination period: This is how long you have to wait before your disability insurance benefits start paying. You select this time frame when you sign up. Some disability insurance policies begin paying benefits immediately after a claim is approved, while others don’t begin until one month or even longer.
  • Benefit period: This is the length of time your disability insurance policy will pay you a regular benefit while you’re disabled. When you choose a benefit term, you’re choosing how long benefits are payable to you — from a few weeks to one year or longer.

While you’re recovering, you can use your disability insurance benefits to help you cover your regular monthly bills, like your mortgage, car payment, credit cards, groceries and other expenses.

If you’re eventually able to return to work, but can’t perform the same job because of your disability, you may still receive benefits.

How much disability insurance do I need?

A typical disability insurance benefit is 60 to 70 percent of your pre-disability income. For example, if you earn $65,000 per year, 60 percent would be $39,000, or $3,250 per month.

It’s important to remember that just because disability insurance cannot replace your full income, it doesn’t mean it needs to. It may be helpful to focus on the single greatest expense you have – your mortgage, perhaps. A disability insurance policy intended solely to cover your monthly mortgage payment could cost less than a meal out.

How much does disability insurance cost?

A good rule of thumb is about 1 to 2 percent of your annual income. Your disability insurance premiums (usually a monthly payment) are based on your salary and other factors such as your profession, age, gender, your health, or whether or not you use nicotine products. You also may choose to add riders – additional forms of coverage you can include in your policy – the cost of which will be added into your disability insurance premiums.

Online quoters like Assurity’s can show you how much disability insurance you need – and what it’ll cost.

Who needs disability insurance?

Disability insurance isn’t just for white-collar professionals like doctors, dentists and lawyers. Here’s the truth: If you earn a paycheck, you should protect it.

Here’s why: According to the Social Security Administration, more than one in four of today’s 20-year-olds will become disabled before their 67th birthday. Are you still thinking, “I’m healthy, relatively young and work in front of a computer all day – why would I need disability insurance?” Accidents only account for 9 percent of long-term disability claims, according to the Council for Disability Awareness. More common reasons include musculoskeletal disorders and cancer.

If one of those conditions kept you from doing your job, would you be able to pay your mortgage, student loan or credit card debt, or even cover your everyday expenses?

Everyone’s situation is different. Whether you’re looking to insure all your monthly living expenses or one significant expense, you should consider disability insurance as a way to protect them.

How do I get disability insurance?

Many companies offer disability insurance as a voluntary benefit, which lets employees purchase coverage at a group rate. You can ask your human resources department if your company offers one of these plans, and then look at adding this type of insurance to your current healthcare coverage during open enrollment.

You can also buy an individual disability insurance policy through an insurance professional. Buying your own disability insurance policy will allow you to customize it with riders – additional features – such as a return of your premiums if you never use it.

Assurity offers individual disability income insurance policies to fit nearly any budget, health condition or occupation – even if you’re self-employed.