Disability Insurance protects you by replacing your income in the event of an accident. Some employers offer a form of short-term disability insurance but it may not be enough. What happens if they don’t provide that type of coverage or if it is not enough to replace your lost income? How will you look after your family if you are unable to work?
If you are concerned about income protection, then you need to understand disability insurance in greater depth.
First, there are different types of policies available.
- Long-term disability
- Short-term disability
- Employer-provided disability
- Social Security disability
- Workers’ compensation
The first two, long-term disability insurance and short-term disability insurance, supplement the other three. Employer-provided is just that, insurance you get through work. Social Security disability comes through government channels and Workers’ Compensation is a requirement by California law for all companies with employees, so once again it is employer-provided insurance.
Should I Get Coverage?
Most people have given some thought to life insurance. You’ve weighed the impact of your loss on your family and calculated how much it would take to support them. You can think about disability insurance in the same way. The same amount needed to support your loved ones after you are gone is what you will need to support them if you are incapacitated and unable to work.
If you have children, then like life insurance, disability insurance is a necessity. For those nearing retirement, it becomes less of an issue. First, consider how many more years you plan to work and multiply that by your yearly income. That will give you a loose figure of how much coverage you might need. Most disability insurance pays out a percentage of your income over time, rather than a lump sum at the time of the accident.
So, how much does it cover?
Roughly, it covers about two-thirds of your income, assuming you cannot do your job anymore, or subject to policy terms, any other type of job.
How Much Does It Cost?
For most, disability policies cost from 1-3% of your annual income. However, the actual price depends on a number of factors, including the results of a medical exam.
Something else to consider is the income tax on disability payments. Your income is taxable if your employer pays the premium cost. If you pay the premium on your own, then it’s tax-free.
What Are My Odds of Needing Coverage?
Industry reps say that you have a 1:4 chance that you’re going to need disability insurance. However, working a white-collar job and embracing a healthy lifestyle lower those odds. You may also have family who can help if you were disabled, and by modifying your living arrangements, you may find you don’t need to replace your entire income. Lower benefits will translate into lower premiums.
How long does it take to start receiving benefits?
Because most people can make it for a few months on their personal savings, disability insurance doesn’t start paying benefits right away. Short-term disability policies start payouts first, and then long-term disability takes over
Where can you get disability insurance in California?
If you need more information on either personal or commercial insurance, contact Post Insurance.
Post Insurance is the largest insurance broker in the area surrounding Torrance, CA. We represent over 50 leading insurance companies, which means we can build exactly the right policy to suits your needs.
To receive a quote, call 800.262.9998.