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- Disability protections for workers are better in states like California.
- Workers compensation may leave you with a gap in coverage.
- Disability insurance covers housing, food, and other bills, but not medical bills.
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But did you know there's a type of insurance that can cover all or part of your income should you become injured or sick and are unable to work? It's called disability insurance, and you shouldn't skip it.
What Is Disability Insurance?
Disability insurance is similar to life insurance as it replaces lost income. In exchange for regularly paying your premium, disability insurance replaces part of your income should you become injured, sick, or unable to work.
Workers can choose between short-term and long-term disability coverage. Some states require employers to provide both. You can look up your state laws, though your HR department should also be able to answer common questions.
Short-term disability (STD) kicks in within two weeks of injury or illness. As the name suggests, it's only temporary, but coverage can last up to 26 weeks. Long-term disability (LTD) typically begins payouts after 90 days of a qualified injury or illness.
Benefits can be paid for much longer, anywhere from two to 10 years, up to age 65, even for life. However, it's crucial to note long-term disability coverage may also require regular check-ins.
Some experts suggest everyone should get disability insurance, regardless of the type of job they have or their income. States also have varying laws around employers' responsibilities in this area. However, full coverage is not always realistic. Read on to learn the top types of people who should have disability insurance.
Disability Insurance Is Available at All Wage Levels
You should opt for disability insurance if you're the sole earner in your family. It doesn't pay you at your regular rate, but it can provide for your family while you're out. Also, the benefits are based on your income before your injury. So some workers may have more incentive to get back to work. The protection can allow workers time to recover regardless of income level.
One important thing to note is disability insurance does not cover medical bills or professional home care. In states like California, employers must keep workers on the company's medical insurance as long as the worker has a legitimate reason for disability leave. You'll want to look into state coverage and other options in states with less aggressive worker protections. The same would be true for self-employed or 1099 workers.
Disability Insurance Can Help Parents Pay Bills
Workers with children should also consider disability insurance. It can supplement income to help you pay for childcare, groceries, family medical bills, and more while you cannot work. Experts suggest carrying a policy covering 60-70% of your income.
Many people assume childcare is unnecessary if one parent is staying home. But unfortunately, this is not always applicable for disabled workers, whether short-term or permanent. More importantly, if there's a medical or other emergency or your significant other loses their source of income, child-related costs and everything else could cripple a family financially speaking.
Disability Insurance Is Also for Self-Employed Workers
Self-employed workers or own small business owners may disregard the need for disability insurance. After all, you have to keep the company operating smoothly, and you're paying yourself.
The exact process may change as you're not collecting a regular wage as a W2 employee. Calculations would be based on your average salaries over a more extended period. Unless your business can operate independently, providing passive income, you need disability insurance. Even then, business owners should prepare for unexpected business interruptions due to their absence.
How Expensive Is Disability Insurance?
Contact an insurance agent if you have more questions about how this would work. Professionals can walk you through rates, coverage, and more to decide what kind of disability insurance is right for you. In some fields, long-term disability insurance may be the only protection, as workers compensation would not apply.
For a W2 employee, the question of how much should short term disability insurance cost is simple. It's either free or just a few dollars per month on employer-based plans. Self-employed workers or business owners don't enjoy employer benefits. But they may still find that disability insurance doesn't cost nearly as much as you might think.
Workers Compensation May Not Be Enough for Labor-Heavy Jobs
Workers compensation is essential, especially when discussing manual labor jobs. Accidents happen every day, and it's not always a new injury. Instead, it could be an old, nagging injury that never properly healed.
Unfortunately, manual labor positions may be more vulnerable to permanent disability. For example, it's much easier to return to an accounting position with a bad leg than an auto repair or construction job. Even a minor injury could turn into weeks off work with no pay in physically demanding roles.
Again, workers compensation benefits are more aggressively worker-friendly in states like California. But it may not be enough, especially for extended or permanent injuries. Workers compensation is also specific to workplace injuries. What if something happens that rides the line between work and personal?
Disability Insurance Can Help with Nagging Injuries
Did you know just 14% of Americans have disability insurance? That leaves millions of vulnerable workers who are one accident or illness away from financial pinch devastation. It could be a nagging pain in your lower back that requires ice packs every night or an ongoing injury that regularly takes you out of work. Unfortunately for office workers, these nagging injuries can grow even with an office job's seemingly benign yet repetitive movements.
The Centers for Disease Control and Prevention estimate more than one in four Americans live with a disability. Unfortunately, this number rises when injuries don't fully heal because workers cannot take the time to get the proper care.
Disability insurance is one way to shield yourself financially to make wise decisions before a nagging backache becomes a permanent disability.
Check with your employer first if you're considering disability insurance. Many states require employer-paid coverage. Your deductions will likely be extremely low even if you have to pay. If you're self-employed or otherwise not eligible for employer-based benefits, you can call your state's disability office or a local insurance agent.