The Gospel of Disability Insurance
Looking for the Best Disability Insurance
I am self-employed part-time. This works out because I get some benefits through my husband's job. One coverage I don't have is disability insurance that will cover my loss of income in case of accident or extended illness. Does anyone know of a cost-effective way to find and purchase this kind of policy?
Judyth should consider how much of her income does she need covered. The maximum normally allowed under a disability policy is 60-66% depending on the insurance carrier. Does she need that much covered? Since her husband is the full-time worker, how much of her income goes to the monthly budget? If her employment expenses, i.e., clothing, phone bills, transportation, etc., were eliminated, how much income would need to be insured to keep the household running smoothly?
The next consideration is the length of time she will need the income. Does she need it until age 65 or would a year be sufficient? The longer the company must pay, the higher the premium. If available, does she want a cost of living increase included in the policy? If so, that adds to the premium.
The third consideration is the waiting or elimination period. How long can you wait before the disability policy starts paying? Seven days, thirty days, six months? The longer you can wait, the less expensive the premium. Most financial experts recommend you have three to six months income in an accessible account to cover emergencies. Unfortunately, most people are only three paychecks from being homeless.
Social Security does have a disability benefit. You can check with your local office to see if you have enough credits earned to be eligible. After verifying eligibility, qualifying for the benefit is difficult. Social Security's definition of disability is TOTAL disability. If you can sell light bulbs by phone from home, you do not qualify for their benefit.
Since Judyth is self-employed, she must provide documentation showing proof of income. Others would normally show a paystub or W-2.
Judyth should also shop around to different insurance carriers for a quote and policy provisions. Also, make sure the company you choose is reputable and financially secure. You can contact your State Insurance Department to find out more about the company, its solvency, and complaint history. This service is provided for free since you pay for it with your taxes.
When Judyth decides on the policy she wants, she should pay for the premiums after taxes. Many people make the mistake of paying for their disability premiums pretax through their Cafeteria Plan (Section 125). When you pay your disability premiums pretax, your benefit becomes taxable. That means that after you get 66% of your normal income, you must pay taxes on a reduced income making it even smaller!
There are many types of disability policies with several different provisions. Judyth should make sure she is talking to a qualified insurance advisor when deciding on a policy.
Bev P. FLMI, LUTCF
Get Competing Bids
I would call an Independent Insurance Agent. They represent many companies so can compare rates for you. I have my house and car insurance with such an agent and two other companies said they can't even compete with the rates we have.
'Return of Premium' Policy
We got a disability policy through Pan American that includes a "return of premium". At the end of 7 or 10 years (you pick), almost all of the premiums you paid are returned to you if you have not made a claim. You can take the return of premium as premium payments for another 10 years of disability insurance, or you can take it in cash. So if you can afford the payments, it basically amounts to a savings account.
AFLAC has such a policy and is not too expensive and actually grows in the amount you receive the longer you keep it and do not use it - they have others too - like Cancer and Hospitalization that pays above and directly to you in case you are hospitalized. My father had it and when he got Cancer the extra income made it possible for my Mother to be my his side with NO money worries. I believe they have a web site www.aflac.com
Go to Zurich
We found that Zurich Direct had the best rates. Our Farmer's insurance agent also quoted us disability insurance rates, and they were more than double that of Zurich. They are speedy and professional, too. I would recommend them highly. Their telephone number is 1-800-708-6799 and they can be found on the Web.
Find Out If You Qualify for Disability Insurance
I have been in the Life & Health Insurance business for over twenty years. You have a problem that is two fold.
- Chances are you don't qualify for disability insurance if you work part time. I don't know of a company that makes it available unless you work more than thirty hours per week.
- Being self-employed makes it even more difficult to get.
Disability insurance is, under the best of circumstances, expensive to buy on an individual basis. The reason is that statistics show that almost everyone will suffer a disabling injury of some type before they're 65 years old. In addition, in years past, companies underpriced and over-extended benefits to very high earning occupations that have ended up costing the companies dearly. A couple of years ago, many companies got out of the individual disability field completely.
If you would like to find out if you can even qualify for a policy, contact an agent who is a broker or look for a brokerage firm that carries more than one company. They should be able to give you more than one quote.
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