Voluntary Benefits
Published by Trustmark Voluntary Benefits on July 25th, 2024
Life is unpredictable, and while we often insure our health, homes, and cars, one crucial aspect that shouldn’t be overlooked for ensuring financial stability is the ability to protect our income. This is where disability insurance becomes essential. But what exactly is disability insurance, and why is it so important?
In this article, we will cover:
Disability insurance provides financial support by replacing a portion of your income if you are unable to work due to a covered accident or sickness; including pregnancy, which is usually considered a sickness in the context of disability insurance. It acts as a safeguard to help maintain your financial stability during times when you are unable to earn a paycheck. This insurance can cover both short-term and long-term disabilities, depending on the policy. Disability insurance typically provides a benefit that is a portion of your income.
For example, if an insured has a policy that covers up to 60% of their income and they earned $70,000 per year at the time of their qualifying disability, they will receive $3,500 per month or approximately $807 per week. These payments can help cover living expenses like rent or mortgage payments, utility bills, and groceries and can help ensure that an unexpected illness or injury doesn't force a drastic lifestyle change. It's important to note that benefits might not be available immediately upon the onset of a disability. Policies often include a period of time (referred to as the elimination period) before benefit payments begin.
What types of disability insurance are available?
There are two main types of disability insurance:
Why is disability insurance important?
Disability insurance is crucial because it helps protect one of your most valuable assets: your income. According to a May 2022 Lending Club survey, around 64% of Americans are living paycheck to paycheck, which makes covering unexpected expenses more difficult.1 Without an income, a sudden sickness or accident could leave you without the means to pay your bills and support your family. Though a long-term injury or illness typically isn’t top of mind, 1 in 4 people will experience some form of sickness or accident leading to disability before retirement age, according to the U.S. Social Security Administration.2
For those who do have savings, disability insurance can help keep those savings secure. Perhaps most importantly, knowing you have coverage gives you added peace of mind about your financial wellbeing. And, if you experience a disability, being insured allows you to focus more on recovery rather than worrying about financial pressures.
How do you get disability insurance?
There are several ways to obtain disability insurance:
Understanding insurance can be tricky, but hopefully this gives you a better answer to the commonly asked question: “What is disability insurance?” By understanding the different types of disability insurance, their importance, and how to get coverage, you can make better decisions to help safeguard your income and financial future in the face of unexpected health challenges.
_________________________________
1 2/3 of the U.S. Population Now Lives Paycheck to Paycheck (prnewswire.com)
2 What Is Disability Insurance And How Does It Work? (usatoday.com)
In this article, we will cover:
- What is disability insurance?
- What types of disability insurance are available?
- Why is disability insurance important?
- How do you get disability insurance?
Disability insurance provides financial support by replacing a portion of your income if you are unable to work due to a covered accident or sickness; including pregnancy, which is usually considered a sickness in the context of disability insurance. It acts as a safeguard to help maintain your financial stability during times when you are unable to earn a paycheck. This insurance can cover both short-term and long-term disabilities, depending on the policy. Disability insurance typically provides a benefit that is a portion of your income.
For example, if an insured has a policy that covers up to 60% of their income and they earned $70,000 per year at the time of their qualifying disability, they will receive $3,500 per month or approximately $807 per week. These payments can help cover living expenses like rent or mortgage payments, utility bills, and groceries and can help ensure that an unexpected illness or injury doesn't force a drastic lifestyle change. It's important to note that benefits might not be available immediately upon the onset of a disability. Policies often include a period of time (referred to as the elimination period) before benefit payments begin.
What types of disability insurance are available?
There are two main types of disability insurance:
- Short-term disability insurance: Provides benefits for a limited period, usually from a few weeks up to a year. It is designed to cover temporary disabilities caused by accidents, sickness, or conditions like pregnancy that temporarily prevent you from working.
- Long-term disability insurance: Provides benefits for a defined number of years depending on your plan. Long-term disability insurance ensures ongoing financial support for more serious conditions that have long-lasting effects on your ability to work.
Why is disability insurance important?
Disability insurance is crucial because it helps protect one of your most valuable assets: your income. According to a May 2022 Lending Club survey, around 64% of Americans are living paycheck to paycheck, which makes covering unexpected expenses more difficult.1 Without an income, a sudden sickness or accident could leave you without the means to pay your bills and support your family. Though a long-term injury or illness typically isn’t top of mind, 1 in 4 people will experience some form of sickness or accident leading to disability before retirement age, according to the U.S. Social Security Administration.2
For those who do have savings, disability insurance can help keep those savings secure. Perhaps most importantly, knowing you have coverage gives you added peace of mind about your financial wellbeing. And, if you experience a disability, being insured allows you to focus more on recovery rather than worrying about financial pressures.
How do you get disability insurance?
There are several ways to obtain disability insurance:
- Through your employer: Some employers offer disability insurance as an employer paid benefit and some offer voluntary coverage. Advantages to purchasing through your employer might include lower group rates, easier enrollment, and no health assessments. Disadvantages could include limited customization and coverage tied to your job Check with your HR department to understand what options are available to you and enroll during open enrollment periods. If your employer doesn’t offer the coverage you’re looking for, let them know!
- Direct purchase: You can also buy disability insurance directly from insurance companies. Advantages include customizable coverage. Disadvantages might include higher costs and potential medical underwriting. Working with an insurance broker can help you find a policy that suits your specific needs and budget.
- Consult a financial advisor: A financial advisor can guide you in understanding your insurance needs and help you choose the right disability insurance policy. Advantages include personalized advice and expert guidance. Disadvantages can include potential fees and advisor bias.
Understanding insurance can be tricky, but hopefully this gives you a better answer to the commonly asked question: “What is disability insurance?” By understanding the different types of disability insurance, their importance, and how to get coverage, you can make better decisions to help safeguard your income and financial future in the face of unexpected health challenges.
_________________________________
1 2/3 of the U.S. Population Now Lives Paycheck to Paycheck (prnewswire.com)
2 What Is Disability Insurance And How Does It Work? (usatoday.com)
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Written by Trustmark Voluntary Benefits
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