Myth: “I have Disability Insurance coverage through work.”

Reality Check: Group coverage is rarely enough. Your own policy fills the gaps.

Disability insurance through your job is a nice employee insurance benefit, especially if the employer is paying the premium cost.

But what does it cover? Is it short-term coverage only? (maybe just 3 months) Or is it long-term coverage too?

What percentage of your monthly income would it send you as benefit if you were disabled? For how long?

What is the definition of disability? (we will be happy to review your coverage and help you compare)

What we usually find in our review is a decent employer plan, but without many of the promises individual Disability Insurance insurers make. In short, the monthly benefit rarely replaces your take home pay. And the strong definition of disability is either missing, or only lasts 2 years.

And most employer disability insurance plans end when you change employers.

Individual Disability Insurance coverage can fit your needs more closely, and remain with you for your entire working career.

Another Detail of Employer-Sponsored Disability Insurance….Taxation.

One of the many benefits of choosing your own Disability Insurance policy and paying the premium costs with post-tax income is that if you are ever disabled, you receive the policy benefits from the insurer each month tax-free! Since monthly benefits are usually designed to replace your take home pay, you have all of the funds necessary to fund your family budget while disabled.

Taxation is different with plans through work…if your employer pays for the premium costs of your group DI coverage at work and then you became disabled and began receiving benefits, those benefits would be taxable as regular income. A monthly disability benefit equal to your take home pay, then reduced by owed Federal and State taxes is nowhere near your take home pay!

This is more understandable in a real life scenario. Let’s compare three nurse practitioners, all three of which earn $7,900 in gross monthly income. One whose employer pays for her group DI coverage, a second who has the same group coverage, but also chose her own plan to fill in the gaps, then a third who purchased her own DI coverage:

The only nurse practitioner not covered well is #1, as she relied only on her group coverage. Nurse practitioner #2 chose her own policy to supplement (this is the most cost-effective option). And nurse practitioner #3 chose all of the needed coverage in her own policy.

Make sure any disability insurance you have through work is enough to fund your family budget if you are disabled. If not, consider an individual disability insurance policy to fill in the gaps.

Myth: “Workers compensation insurance covers me if I am disabled.”

Reality Check: Yes, if your are injured at work. What about the other 16 hours in each day?

States do require employers to provide Workers’ Compensation coverage that pays for lost income and medical expenses when you are hurt on the job. And the disabling event at work can have been an injury or illness.

Note that many small businesses with only a few employees are not required to carry Worker’s Compensation insurance. And with most Worker’s Compensation policies the business owner is exempt from coverage.

But what about the other 16 hours of the day?

What if you are injured away from your workplace? Maybe a car accident, or injury while playing sports.

What if you develop an illness that is not work related? Cancer? Other debilitating illnesses?

Worker’s Compensation insurance does not apply in these cases.

The fact is that the vast majority of long-term disabilities are not job-related. Disability Insurance is coverage 24 hours a day, 7 days a week, 365 days a year.

Disability Insurance offers benefits to help you fund your family budget whenever a disability occurs, not just at work.

Myth: “I don’t work in a dangerous profession, so I do not need DI coverage.”

Reality Check: 90% of Disability Insurance claims are due to illness, not injury.

We hear this myth often when discussing with clients the need to protect their paycheck with Disability Insurance. People who work in an office are not going to be hurt there, so why Disability Insurance?

Benefits from Disability Insurance do not happen only if you were injured at work! Benefits from your Disability Insurance policy begin paying because a doctor has certified you do not currently have the ability to perform the duties of your job:

-because of an accident at work, but also an accident that occurred anywhere else.

-because an illness you are dealing with is preventing you from working and earning your income.

In short, Disability Insurance is income protection for injury and illness.

And everyone who earns an income needs Disability Insurance! Yes, the person who performs underwater demolition with explosives (yes, it is a real job, and very dangerous!) needs DI. But the person who sits or stands at a desk all day has an equal need for Disability Insurance protection.

Myth: “I am young and healthy. I don’t need Disability Insurance yet.”

Reality Check: Disability does not discriminate on the basis of age. And DI coverage covers young and old.

When you are in your 20s and 30s it is easy to feel immortal, and free from the possibility of disability.

But here is a fact to consider…One in four of today’s 20-year-olds will become disabled at some point in their career, before age 67.

Yes, that means the disability will occur sometime between age 20 and 67, and a majority of people currently on disability are in the older age groups. But almost 9% of people currently disabled are in their 20s. The same for people in their 30s, almost 9%.

The better question to ask no matter your age…How long would you be able to meet your rent or mortgage, car payments, bills and other monthly expenses if you couldn’t work?

Disability insurance is there for just that reason. If you were sick or injured and unable to work, DI coverage would replace a portion of your paycheck until you could work again.