If you have an accident or injury, your health insurance typically helps cover the medical bills. People sometimes forget to plan for situations where they are physically not able to work. Planning ahead for a financial crisis can reduce the devastating financial risk. That's where disability insurance comes in. In contrast to Social Security disability coverage, which has eligibility requirements and a rigorous application process, disability insurance is available to anyone and is a tool to help mitigate the risk of loss of income. Financial well-being is important to most people and requires planning.
Why is it important to have disability insurance?
Disability income insurance products can help you plan for the unexpected and help protect you and your family financially. They provide financial income to help cover expenses as it pays you a percentage of your salary if you become totally disabled due to an illness or injury that prevents you from working. Depending on your policy, disability insurance covers your lost income for anywhere from a few weeks to longer periods of time. Here are more details on the major types of disability insurance.
Types of disability insurance
Long-term or short-term disability policies are generally the available options.
- Long-Term Disability Insurance. A type of disability insurance policy that provides funds to help replace lost income if you become disabled for an extended period of time.
- Short-Term Disability Insurance. A type of disability insurance policy that provides funds to help with monthly expenses like car loans, mortgage, rent and credit cards — or to help replace lost income if you become disabled.
Here are more details about the benefits and options for most disability insurance policies.
- Short-term disability has a one- or three-year benefit period and can replace a portion of your monthly income up to a maximum of $3,000, based upon your income.
- Long-term disability has a five-year benefit period or a "to age 67" benefit option and can replace a portion of your monthly income up to a maximum of $20,000, based upon your occupation and income. As part of this policy, you may want to consider optional riders:
- A cost of living adjustment (COLA) benefit to protect against inflation by increasing your monthly disability payments each year.
- Residual disability riders that continue to pay out in reduced amounts if you're able to work part-time.
- Accidental death and dismemberment (AD&D)
- Social Insurance Supplement Rider (SIS) provides an additional benefit amount. Your disability benefit amount will be reduced proportionally once the SIS benefit is approved.
- 5 Year and to Age 67 Own-Occupation option which changes the qualification of a claim so it’s specific to your occupation (if you can do another job, you would still get the benefit).
Disability insurance for the self employed
Planning, strategizing and mitigating risk is especially important when you have a business and are self-employed. Disability insurance is a particularly important tool to mitigate risk for people who own small businesses and are self-employed. Affordable disability insurance may protect the business too. Discuss with your State Farm® agent the expenses and other financial obligations you need to cover if a disabling injury or sickness occurs.
To help you navigate the variety of insurances and their options, talk to a State Farm agent today.