Being your own boss carries certain advantages, but a rich benefits package isn’t among them. Self-employed individuals wear many hats – sales, customer service, HR, marketing, and even IT. It seems everything depends on you. But what happens when a serious injury or illness prevents working for extended periods of time? How do bills get paid without income? In the same way that many businesses provide disability insurance to protect employees from such events, disability income insurance is available for self-employed individuals.
The most common causes of long-term disability may surprise you. Injuries and accidents happen, but illnesses like cancer, heart attack, or diabetes cause most long-term disabilities. Back pain and arthritis are also significant causes. Sample claims can include:
A doctor’s prognosis necessitates an extended work absence.
While skiing on vacation, a broken arm prohibits working for six weeks.
A work-limiting back sprain is deemed not covered by work comp.
In such situations, disability income insurance steps in with benefit payments. These are a percentage of income, usually 60% or 70% depending upon the policy, if an illness or injury prevents work. Unlike benefit payments from an employer’s group disability policy, those from individual disability income insurance are not taxable. You keep all the benefit received. Policies specify a waiting period before benefit payments begin, which acts like a time deductible. Waiting periods can be 30, 60, or 90 days, all the way up to a year. The longer the waiting period, the less the cost of the policy. And policy pay-out periods are flexible as well, offering benefit payments for as little as one year, all the way up to age 67. The longer the payout period selected, the greater the cost of the coverage.
Disability income insurance payments can be used for personal expenses such as a mortgage, utilities, or many others. However, a business overhead expense rider is particularly valuable for self-employed individuals. This rider pays for extra costs associated with the business while the owner recovers, guarding against the dangers of work stoppage. If unable to return to work, it will even pay for such costs while the owner arranges to sell.
Disability Income Insurance Verses Other Coverages
- Long Term Care: Disability income insurance protects against a loss of income. Conversely, long-term care insurance protects against the additional expense of long-term care services.
- Workers Compensation: Disability income insurance protects against lost income primarily due to non-work-related injuries. Workers compensation insurance covers health care costs plus lost income due to work-related injuries.
- Social Security: Although Social Security may provide limited disability benefits, differences exist. It can be difficult to quality for Social Security benefits, and declinations can be costly. If qualified, the length of time before benefits arrive can be long, sometimes taking years. Also, the amount of benefit received may be significantly less than that available through individual disability income insurance.
How to Apply
Qualifying for a disability income insurance policy is an easy process. Contact your Bankers Insurance agent to request an application or fill out the quote request below and we will be in touch. Medical records or a physical may be required. The cost of disability income insurance is based on occupation, current health, the waiting period, and the total benefit amount chosen.
Filing a Claim
When filing a claim, the insurance company will request a doctor’s statement certifying the disability. Your insurance agent can assist in submitting the claim. Once disability income benefits begin, premium payments are waived. If the disability is temporary, payments will resume when able to return to work.
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