Your ability to generate an income is precious. Personal disability insurance can help you retain that ability even if you’re sidelined by injury or illness.
Illustration by Angela Martini
When I started researching personal disability insurance, it all seemed so dry and out of reach. There were many hypothetical questions and hedged hypothetical answers, and more boring phone calls. Then, one evening while attending a red carpet auto dealership launch, I was chatting with a charming gentleman over vegan eats. Imagine my delight when he started telling me about what he does — financial planning and insurance. It’s not just that he sells insurance, it was the stories and passion, and how interesting he made it. Edward Tyng isn’t just a representative for Mass Mutual, he’s the guy that made this an interesting subject and a wake-up call.
As a beauty professional, do you work to pay the bills, or just for fun? “If you are like most people, you have insurance on your house, your car, and other items of value. But, you may have overlooked protecting what is often your most valuable asset — your ability to generate an income,” according to Massachusetts Mutual Life Insurance Company.
Since insurance has time-sensitive and far-reaching legal and tax implications, you should consider all of this information a jumping-off point and not comprehensive advice. See your attorney, insurance representative, and tax advisor to decide what is right for you and your situation.
So what exactly is disability insurance? Basically, it’s insurance that can provide income if you get hurt or too sick to work. Generally, policies replace 45%-60% of your gross income. It’s not hard to imagine situations in which you might need it. If you become sick or hurt and couldn’t work, would you be able to pay your living expenses and maintain your lifestyle? What would happen if the sickness or accident increased your expenses? Many times, people need extra help when they are sick or injured. They can’t carry out simple activities that were once a no-brainer. Costs for things like cleaning the house, walking the dog, or cutting the lawn can add up quickly, so don’t forget to think realistically about how an illness or injury would affect your life. An uninsured driver crossing your path could change your life forever.
Some employers may provide or may offer group disability insurance, and you should discuss what is available and gaps with your insurance representative. They can look at the big picture and show you how it fits your financial picture. Be sure to ask specifics of your trusted, licensed, tax professionals about whether each option is taxable, as this may affect the level of coverage you may want.
Tyng shared with me that the taxability of disability income benefits depends on a number of factors including how the insurance was purchased (pre- or after-tax dollars) and if the coverage was purchased or paid for by an individual or their employer. Using pre-tax dollars may not always be the best option.
Things to Think and Ask About
Policies vary widely — remember all
those hypothetical questions and answers I mentioned earlier? Every person and situation is different. As people get older, their life situations and careers change. Here is a short list of things to ponder as you start your research.
1. What is considered disabled according to the policy? Does it protect you if you can’t do nails or is it broader and require that you not be able to hold any job? This may be important for your own happiness. Do you want to change careers?
2. What coverage is available? Will it cover a percentage of your income? How long will the policy be in force and how long will it pay benefits? How long can it be renewed?
3. Is there a waiting period before actual coverage begins?
4. Is this insurance tied to your employer?
5. Is this supplemental insurance?
6. Can you take it with you if you move or change careers? Is it portable?
7. Can you carry multiple policies, and how might they be reduced if you make a claim?
8. If you qualify for Social Security Disability benefits, will your insurance benefits be reduced?
9. Are there any return-to-work programs?
10. What happens if you go back to work and have a relapse?
11. Will the policy still pay out a portion if you are forced to take a lower-paying job?
12. Have you chosen a licensed agent and a reputable company?
Talk with your insurance representative about possible exclusions and be honest when filling out paperwork that supports the application. Pre-existing conditions may affect acceptance and when conditions are covered. Acts of war or injuries incurred while under the influence of drugs or alcohol, or while committing a crime may be excluded. Each state has varying laws on insurance. It is common for insurance companies to request medical records, blood tests, and physical exams before issuing a policy. Having a serious or chronic condition will likely mean higher premiums and may affect acceptance.
So, now that you have started thinking about insuring your paycheck or the paychecks of those who work for you, you have some research to do. Get out there and find the most competent, reliable, insurance representative and pay attention as you ask your questions. A visit to your state’s website for the board of insurance will yield a list of licensed professionals and more tips on shopping insurance. When you finally sign on the dotted line, read every page of the insurance documents completely. If you don’t understand something, ask for clarification.
Disability Facts and Stats
> According to the U.S. Social Security Administration, one in four of today’s 20-year-olds will become disabled before they retire. The average monthly benefit paid by SSDI was $1,130 in 2012.
> The Council on Disability Awareness Long-Term Disability Claims Review shows almost 30% of long-term disability claims are due to musculoskeletal or connective tissue problems. Accidents account for over 10% of claims.
> The Consumer Federation of America and Unum did a survey and found that a large portion of benefit recipients surveyed (43%) are living alone or with dependent children. One in three recipients had applied for food assistance. Forty-two percent missed at least one payment for bills or consumer loans.
> Social Security replaces only a fraction of lost salary. You must be disabled for months and be expected to be disabled for at least a full year — or die. And you have to be unable to be gainfully employed in ANY occupation when you became disabled.
> The older or unhealthier you are the harder it may be to get coverage.
Contributing writer Erin Snyder Dixon is a licensed nail technician and owner of Extremities Spa Salon in Newport News, Va.