Disability Insurance

What is individual disability insurance?

Disability insurance also called disability income insurance, will protect a portion of your income (including bonuses and commissions) if you are injured or are too sick to work. It is portable and continues to cover you if you change jobs.

Who needs disability insurance?

Any ‘individual’ who has a job and has financial liabilities such as a mortgage, rent, and other living expenses. Even if you have group disability insurance through your employer or social security disability insurance or state disability insurance or workers’ compensation insurance, it may not be enough to cover your living expenses.

Studies show that just over one in four of today’s 20-year-olds will become disabled before reaching age 67.

How much coverage should I have?

Your disability insurance should attempt to cover your living expenses.

Other sources of disability income protections

Worker’s Compensation
Workers’ compensation insurance provides medical and wage benefits to people who are injured or become ill at work.

Pros:

• If you are employed and are subject to a work-related injury or illness, your employer’s workers’ compensation insurance will provide, typically, up to 2/3rds of your wages.

Cons:

• It is time-limited, in Rhode Island, for example, it is 312 weeks
• If your injury or illness occurs outside of your work environment, this type of insurance will not cover you
• It does not cover 100% of the lost income
• Most long-term injuries are ’not’ the result of a work related injury

State Disability Programs
Rhode Island’s state-run program is TDI ( Temporary Disability Insurance) and is paid for by a specific tax that is deducted from employees’ pay.

Pros:

• Eligible employees who are unable to work due to illness or injury will be paid a portion of their lost wages
• It covers pregnancy

Cons:

• It does not cover 100% of the lost income
• It is time-limited in Rhode Island, for example, 26 weeks
• TDI payments will be deducted from a workers’ compensation settlement, if applicable

Social Security
Social Security pays benefits to people who can’t work because they have a medical condition that’s expected to last at least one year or result in death.

Pros:

• Eligible individuals will receive a portion of their income
• Your adult child also may qualify for benefits on your earnings record if he or she has a disability that started before age 22

Cons:

• It does not cover 100% of lost income
• You must be Social Security eligible to qualify for payments
• Difficult and time-consuming to qualify

Employee Sponsored Coverage
Employers, typically large organizations, provide their employees with group disability insurance coverage. There are two forms: short-term disability (STD) and long-term disability (LTD).

Pros:

• Short-term disability will provide, typically, 50% to 70% of an employee’s income for about three months
• Long-term disability similar levels of income for longer periods

Cons:

• Insurance payouts are taxable
• It does not cover 100% of the lost income
• You may have to opt-in to coverage
• You will lose the coverage when you change jobs

What are the Pros and Cons of  Individual Disability Insurance
This type of coverage is the most flexible of all because it can be supplemental to the other types of disability coverage and is portable.

Pros:

• It is portable; you will not lose coverage if you change jobs
• It can be supplemental to the other types of disability which means that when combined you can have full income while you are unable to work
• Typical coverage is 50% to 70% of your pre-disability gross salary
• When paid with after-tax dollars, the benefits are income tax-free
• You can choose the policy which best suits your needs

Cons:

• It does not cover 100% of the lost income

Use Individual Disability Insurance as your sole, portable disability income protection, or as supplemental disability income when combined with income from other disability coverages that you may have. A Hilb Group agent will guide you through the process of purchasing a disability insurance policy, at competitive rates, for you and your family.