Do You Need Disability Insurance?
This is not an easy question to ask many people, nor is it an easy question for them to ask themselves. While no one like to think about their own deaths, it’s a given in today’s world that people with responsibilities like family and loved ones need life insurance. Disability, however, is not so easily considered.
This is because while most of us would prefer not to think about our own demise, we can at least admit that it will happen and plan accordingly. Disability is a little different, though. We don’t often come to grips as easily with the idea that we might be handicapped for a year, three years, five years or unable to perform in our current career forever.
The question is, if that happens, will you have coverage? How will your day-to-day expenses and living costs be paid?
Most disabilities are not the result of injury, but because of temporary or medium-term medical problems. Heart attacks, surgeries, cancer, etc. are much more common reasons for disability claims than are injuries or accidents.
Professionals are even more at risk because the more specific their job requirements, the more likely they are to be disabled from performing job tasks due to sickness or injury. A surgeon, for instance, might find that an ulcer leads to chronic shakiness in his hands for a few months, meaning he cannot perform surgery. A lawyer might find that a minor stroke affects his ability to speak effectively on court or even on the phone. Both are now effectively disabled, unable to perform part of their normal job duties.
Disability insurance usually covers from 1 to 5 years of disability either partially or fully, depending on the condition’s effect on your career. Most plans pay 60-80% of your income during that time.
It’s important to know that if something happens to you, such as a medical condition or an accident, that you will have coverage so you won’t have to mortgage your home or sell assets to keep financially afloat during that time you’re unable to work.
That is what disability insurance is all about and that is why it’s so important for professionals, especially, to carry it for themselves and their family.
How Insurance Defines Disability
There are two major things to look at when considering a disability policy for your needs. The first is how the policy defines “disability” and the second is what type of benefit payout the policy has. Here, we will look at how policies usually define “disability” and what that means to you. In another article, we will cover benefit payouts.
Defining Disability
Believe it or not, the definition of what is a disability is going to be spelled out in the policy documents. This is important because that definition will decide when you can and cannot make a disability claim against the policy.
Two common definitions are often used. The first defines a disability as being anything that prevents you from performing the major duties of your occupation. This means that the policy pays benefits if you are unable to perform the “material or substantial” duties of your occupation.
The second definition is a little less covering. This definition calls a disability anything that prevents you from performing a gainful occupation. In other words, a lawyer who has a small stroke and cannot speak well and so cannot give oratory in court can still push a broom as a gainfully employed janitor. Therefore, they are not “disabled” under this definition.
Obviously, the difference can be quite large. The second policy, for instance, could mean that you will no longer make $200,000 per year and your policy will pay out nothing because you are capable of making $25,000 per year in another job.
So most professionals will want to make sure the definition of disability in their policy is occupationally-tied. In other words, the policy covers you if you’re unable to perform your normal occupation or will have to substantially alter your career to continue working.
This is often the largest reason someone who is no longer able to perform their work and continue their career will find that they are not eligible for disability payouts from their insurance policy.