The Need For Disability Coverage

You have planned for everything and you think that everything is perfect as far as your financial life is concerned. You have made the ideal plan that will help you reach your goals that include ample life insurance and enough retirement savings to provide adequate protection to your family in case of your death while the family is still dependent on you for income. However, you must have left a big gaping hole like most others that can quickly dismantle all the planning you have done so far. It is the failure to plan for the risk of becoming disabled which means you will not be able to work for a long period of time.

If you are unable to earn a paycheck for a few years continuously, it will make it extremely difficult for you to take care of your expenses which means you may have to dip into your retirement savings or take on expensive debt which will severely affect your ability to save for the future. Peter Creedon who works as a certified financial planner in NY City says that disability insurance is not talked about much but it is important to protect one’s income when it comes to financial planning.

Many people have some form of disability insurance coverage through their employer where premiums are either fully paid or heavily subsidized by the company. It is great to have something than nothing but the disability insurance coverage provided through the employer usually gives only a false sense of security as this type of coverage does not offer enough money for one to meet their needs. Thankfully, due to advanced underwriting techniques and consolidation in the industry, workers with particular jobs including individuals working from home or those working as independent contractors can now easily get disability coverage. Extra documentation is still needed by the insurance companies in order to prove stable income.

Individual Policy

As far as the premium for buying an individual policy whether as the only coverage or as a supplement to the existing group coverage, is concerned, it depends on your gender, age, the benefit amount, definition of disability as per the policy as well as various other details. If you want to get quotes from Principal or Illinois Mutual, try their calculators at:

There are many different types of individual policies. For most individual policies, you should be able to get benefits if you are unable to work an occupation for which you have the right experience and education. There are some generous policies available that will keep paying you in case you are unable to do a specific job (owner occupation), even if you are capable of performing another job. There are also some highly restrictive policies that will not pay you if you are able to do any kind of job.

Hazzard says that you need to have a complete understanding of the activities you may or may not be able to do on becoming disabled. You may need to buy only a basic policy in case your job does not require many physical duties such as a desk job where you can continue working even with broken arm. You will get paid under this policy in case you are unable to do the job due to a disability. You will also get paid if you are unable to do any kind of job based on your experience and education such as a debilitating illness or cancer, or rheumatoid arthritis that will keep you away from the work for some time. Steve Stribling, Northwestern Mutual’s VP of disability income, suggests that this level of coverage is usually enough for most people.


A 45 year old man earning $ 100,000 a year working as a financial adviser can get an extra benefit of $2,010 each month with this type of coverage from Northwestern Mutual at a price of just $ 871 a year, in addition to the $5,000 per month coverage provided through the employer. In other words, it means that this person can cover up to 84% of his income which is the maximum limit offered by Northwestern Mutual at that income level. This coverage is provided up to the age of 67 and there is also an annual cost of living adjustment of 3%. On the other hand, $1,350 is the annual cost for a 45 year old woman for this kind of coverage as the premium price for women is higher due to women making more claims for such policies.

Research to Find the Right Policy

While doing your research, you also need to figure out the payments in case you start working part-time. Some policies will completely stop paying you if you start working whereas some policies offer residual benefits which means you will be paid partial benefits in case your work part-time. These benefits are automatically included by some insurers but some companies may ask you to pay around 10% extra.

Individuals working a specialized job that they might find difficult to perform after an illness or an injury should research an own-occupation policy. This is a more expensive policy but it is ideal for professionals working as a lawyer, dentist or surgeon among other things. Under this kind of policy, you get benefits even when you are capable of working another job but are not able to do the primary duties of the earlier job. Ryan says that a 35-year-old male attorney (making $210,000 annually) will need to pay around $2,244 each year for a policy offering a benefit of $ 10,000 monthly until the age of 65. This policy has a 90 day waiting period. This policy will pay full benefits even if the male attorney starts working as a consultant or as a teacher but is unable to practice as a lawyer. Partial benefits are all also paid even if they are able to work part-time.

Same policy will require an attorney to pay around $3,400 each year, at the age of 45. For women, the policy will cost $4,690 at the age of 45 and $3,540 at the age of 35. If you want to add a cost of living adjustment to your policy, you will have to pay around 12 to 15% more. This will enhance monthly benefits by up to 3% each year if you are disabled.

Like other kind of insurance policies, you can lower the annual premiums by starting early. Many policies available in the market allow you to lock the premiums for life whereas some insurers offer policies that have a lower premium at first but the premium increases over time. The waiting period before the insurance company starts paying can also be chosen but you will have to pay a higher premium in case you want shorter waiting period. Keep in mind that 90 days is the most common waiting period and most people have enough short-term disability coverage at work or sick leave for covering the gap until the insurance company starts paying them disability benefits.

Coverage Qualification

There are two main factors that are taken into account by insurance companies to decide whether they want to issue a policy.

For your income claims, you will be asked to provide tax returns or pay stubs to the insurance company. Earlier, it was not easy to get proper coverage if you had just started a new business but these days, you may get coverage if you are able to provide tax returns from your business for at least a year. You may also qualify for disability insurance policy sooner if you can prove that you have contracts that provide you with stable income for a period of at least six months.

Your health is also assessed by the insurers to calculate the premiums you need to pay. People suffering from mental conditions or musculoskeletal conditions are considered extremely high risk by insurance companies. Similarly, an individual with a history of visits to a psychologist for treatment of depression or a history of chronic back pain might find it difficult to get proper insurance coverage. Larry Schneider (Disability Insurance Resource Center) says that insurers may limit the length of coverage or exclude such pre-existing conditions or may ask the individual to pay extra premium because of pre-existing conditions. In case the condition improves substantially after a few years, the exclusion may be dropped or the premium may be reduced by the insurance company.

Since each insurance company has its own unique underwriting requirements, it is better to work with a disability insurance specialist, especially if you have a health condition, in order to find the best deal as these specialists work with several insurance companies. These insurance specialists get in touch with insurance companies in advance in order to find out coverage in highly complicated situations. Some financial advisers also work with such disability insurance specialists to advise their clients.

To get in touch with a disability income agent, please contact Pacific Insurance Group directly at (425) 246-4222 to get a disability income insurance quote right away.