Long Term Disability Insurance

Insurance is a tool intended to protect us and our families from catastrophic loss and financial devastation. Unfortunately, many of us do not insure one of our greatest assets, our ability to earn an income. We would never think about not insuring our automobiles or our homes, but the loss of either of those, albeit tragic, cannot compare in magnitude to the challenges we would face without our ability to provide a living. The question is not whether we can afford long term disability insurance, but can we afford not to have long term disability insurance.

According to the United States Census Bureau, nearly one in every five people in the United States has a disability. In fact, thirty percent of all Americans between the ages of thirty-five and sixty-five will become disabled for more than ninety days during their working careers. While many people believe that most disability claims are caused by accidents, by far the majority of disability claims are actually caused by illnesses such as arthritis, heart disease, and cancer. 

Disability Insurance can replace up to sixty percent of your income if you become disabled and are not able to work. Policies typically have an “elimination period” or “waiting period” beginning with a minimum of thirty days. This is the length of time someone must be unable to work before benefits will begin to be paid. Benefits can be set to last for a set number of years or until you reach retirement age.

Often people ask why they need Disability Insurance since there are disability benefits available through Social Security. The reason is that it is sometimes very difficult to qualify for Social Security Disability. It usually takes a considerable amount of time and sometimes multiple attempts to get approved. In the meantime, how will you pay your bills for months on end while you wait? Also, the benefit amount that you qualify for with Social Security Disability could be significantly lower than the income amount you need to pay your bills.   

Although there are various online options to purchase Disability Insurance, buying it can be very complicated. For example, one factor to consider is whether you can be forced to find a different occupation after being disabled for a certain length of time. This can be a pitfall in choosing which policy to purchase. It would be very beneficial to work with a licensed independent insurance agent so that they can help you find the right policy that fits your needs. Typically the pricing is similar to life insurance in that there is not a competitive pricing advantage in purchasing online instead of through an insurance professional.

There are five major factors that affect the cost of disability insurance. They are your occupation, your age at the time of application, the benefit amount, the benefit period, and the elimination period. Although, you may not be able to change your occupation, here are a few considerations and ways you can use to control the costs of long term disability insurance:

Buy Young

Some types of long term disability insurance will lock in the rate at whatever age you originate the policy. This means your insurance premiums will never go up. Because your rates are less expensive the younger you are, it would be advantageous to purchase long term disability insurance as early in your adult working life as possible. 

The Benefit Amount

Maybe you cannot afford to insure sixty percent of your income, but what about insuring enough to cover your most critical expenses like your mortgage and utilities? Lowering your benefit amount could make disability insurance affordable, and still give you a measure of protection. 

The Benefit Period

The Benefit Period is the length of time you will need the policy to continue to pay a monthly income while you are disabled. While you might consider a benefit plan that continues until age sixty-five or retirement, the average disability claim actually lasts between two and three years. Shortening the benefit period down to five years or less could potentially save you premiums. Also, for those that are able to qualify for Social Security Disability, the wait time is typically less than two years.

The Elimination Period

One of the best ways to decrease your disability insurance premiums is by lengthening your elimination period. The longer you will need to qualify as disabled before your disability coverage begins to pay out, the lower your insurance costs will be. This is because the longer the elimination period then the less likely a claim will ever be triggered. Having as much as three to six months of expenses in an emergency savings account would allow you to chose anywhere from a ninety to a one hundred and eighty day elimination period. This would greatly reduce your costs. The Bible tells us in I Timothy 5:8, “But if any provide not for his own, and specially for those of his own house, he hath denied the faith, and is worse than an infidel.” KJV We all have a Biblical responsibility to provide for and care for our families. We should not neglect such an important tool of protection so our families have what they need if we become disabled and can no longer provide a living for them.

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