Disability insurance helps replace a portion of your income when you cannot work because of illness or injury. If you have an emergency fund built up, you really only need long-term disability insurance. Long-term disability insurance usually only kicks in after you have been disable for at least a few weeks.
Many people argue that having disability insurance is more important than life insurance. The main reason for this argument is that for a 30 year old male, you are 4 times more likely to become disabled than die. It was that staggering statistic that got my attention.
Waiting Period
The waiting period is from the time you become disability to the time the policy starts paying. Most policies have a 30, 60, or 90 day waiting period. In other words, the insurance company wants to make sure it’s a long-term disability before they start paying. Like I mentioned before, it’s crucial to have an emergency fund to cover the waiting period.
Also, the longer your waiting period, the cheaper the policy. It’s been said before that a 1 year disability with a 7 day waiting period costs more yearly than a 30 year policy with a 90 day waiting period.
What should you look for in a policy?
If you have a highly specialized job or can simply afford to pay the premiums, it's worth paying extra to have an "own occupation" policy. This coverage pays benefits if you are unable to perform the major duties of your own occupation. To trim some of the costs, it may be advisable to obtain "own occupation" coverage for one or two years and "any occupation" coverage after that.
The length of benefits is key, and will affect the cost of premiums significantly. Some policies pay benefits until age 65 or until your full retirement age for Social Security benefits, others for two or five years. Seek out a non-cancellable policy.
You probably also want a policy that will pay "residual" benefits, which will compensate for a decline in income if you are able to work at a new job that pays less.
How much does disability insurance cost?
Prices vary based on age, gender, occupation, amount of coverage and health status. Check with a broker (www.MintcoFinancial.com or call 813-964-7100) to get quotes from at least three different insurers.
For someone who does not have coverage at work, a plan with all the extras including inflation protection costs roughly 2 percent to 2.5 percent of annual salary for a man, and 3 percent to 4 percent for a woman. Women pay more because they file claims more frequently and for a longer duration than men.
If someone has coverage at work but wants earnings to boost benefits to 80 percent salary replacement, the annual cost is typically about 1 percent of the worker's salary.
Why doctors need Disability Insurance?
The medical profession in general is more likely to become disabled for a couple of reasons:
1) You work with other sick people
2) You specialize in something unique.
When it comes to working with disease, blood, and other transmittable illnesses, physicians are at a higher risk than other professionals. Contracting HIV or other diseases through the blood is of the largest concerns. Due to the increased exposure to these types of risks, your chances of becoming disabled are statistically higher.
But the main reason physicians are more likely to become disabled is their unique specialty.
If you are a physician and haven’t had your disability insurance reviewed for a couple of years, it might be a good time to do so. Many group plans are changing and possibly don’t offer the protection you think you have. Many individual plans have also changed how they rate your specialty and improved the amount of coverage you can get.
Call Mintco Financial Team of Independent Financial Advisors to review your Disability Insurance or to quote one.
813-964-7100
