Guide to Disability Insurance
Why is disability insurance important?
Self-employment, unlike traditional employment, comes with no safety net for injury or disability – if something happens and you can’t work for months or years, all your hard work spent building your business will be at risk.
Did you know: 47% of Americans can’t come up with $400 in case of an emergency. ALSO most disabilities are NOT caused by freak accidents. They are caused by back injuries, cancer, heart disease and other illnesses and accidents. Getting disability insurance is your safety net – it replaces part of your income if you get hurt and can’t work, allowing you to cover your bills and basic necessities.
Considerations when shopping for disability insurance
1. You’ll most likely want a plan that covers your “own occupation.” Some policies only pay out if you can’t work any occupation (called “any occupation” policies).
An example: Let’s say you own an auto repair shop and you lose the ability to use your right hand. If you have any “any occupation” policy, the insurance company will say you can still bag groceries at the local Safeway, and they won’t pay out. However, if you bought a policy that covers your “own occupation,” you’ll start collecting. Own occupation policies can be harder to obtain, and will certainly be more expensive, but they’re your best option.
2. Match your plan benefit period to the work and income you’re protecting. You have a choice to purchase short-term or long-term disability insurance. For most people short-term disability will be adequate, paying out up to 2 years. Short-term disability is far more affordable, and appropriate for most on-demand workers.
If you need to insure a long-term job or stream of income, you’ll need a long-term disability policy (example: you’re a photographer and plan to be for life). Some companies will only insure 5-10 years of income, but you can also buy long-term policies that pay out until you turn 65.
3. Make sure your policy is guaranteed renewable (non-cancelable). This means that as long as you pay your premiums, the company has to renew your policy and can’t change the terms or premiums.
4. Cost expectations. It varies, especially based on the duration and payout amount of the policy. Other factors insurance companies wrap into policy price are occupation class, benefit amount, age, gender, and elimination period (the number of days between applying for a policy and it starting). For a good policy, expect to pay between $30-50/month.
Places to look for this disability insurance
Stride doesn’t currently offer a disability insurance recommendation product. Here are a few places you can start.