When just about everyone has a computer or a smartphone and the world wide web at their fingertips, it makes it incredibly easy for misinformation to spread. When it comes to something as important as disability income insurance, knowing how to identify the truth from a myth could make a big difference in helping you to protect your future finances.
To help you gain a better understanding of some of the basics of disability insurance, we’re going to walk you through a few fact or fiction scenarios. Once you’re finished with the quiz, you should have a good grasp of what income insurance is, what benefits you could be entitled to if you need to make a claim, and how disability income insurance works for freelancers and self-employed individuals. So let’s get started!
- Disability insurance acts as a financial safety net if you are unable to earn a regular wage.
- Social Security Disability Insurance (SSDI), worker’s compensation insurance, and long-term income insurance are all different types of disability insurance.
- One in six people will be forced to stop working at some point in their career due to a disability.
- Several states require employers to offer disability insurance to their employees through a state-approved provider.
If you guessed “C,” you’re correct! All of these statements look as though they could be true, but we promise this isn’t a trick question.
Unfortunately, one in four people (yes, that’s 25% of the population) will be unable to work for at least a year during their working lives. Whether that’s due to an unexpected or sudden illness, or an injury that happens outside of the workplace, disability income insurance protects your earnings while you’re focused on recovery.
That’s why having insurance is helpful for anyone, no matter your age or occupation. A handful of states require all employers to offer this, but for the majority of the US population, you’re on your own when it comes to private insurance. Social Security Disability Insurance (SSDI) is usually an option for those who have been paying into the system for over a decade, but the rejection rate for claims is fairly high. Taking out your own policy really can be the stress-free safety net that you’re looking for to safeguard your future earnings.
- If your doctor says that you’re disabled, your insurance claim will be instantly approved.
- Pregnancy-related disabilities are typically covered, so long as your policy was taken out before the pregnancy began.
- Any illnesses or injuries that occurred before the policy started will usually not be covered, thanks to a pre-existing conditions clause.
If you guessed “A,” you’re correct! How disability is defined will vary from provider to provider, but generally speaking, most insurance companies will follow a similar set of guidelines when it comes to what counts as a disability in order to receive benefits. Unfortunately, that means that even if your doctor or medical team has informed you that you qualify as “disabled”, you may not be eligible for your payouts straight away.
Your insurer will need to review all aspects of your medical documentation in order to assess whether you fit the criteria for payouts before your claim can be approved. If an illness or injury is a result of a condition that you had before the policy started (also known as a pre-existing condition), these will likely not be covered and your claim will be rejected.
- Benefits can take several weeks or even months to start being paid out.
- You can use your payouts to cover anything from bills to basic living expenses.
- Disability income insurance can replace all of your normal wages or salary.
- If your policy is paid for using after-tax income, any monetary benefits that you receive will be tax-free.
If you guessed “C,” you’re correct! Even if you take out multiple insurance policies, you will never be able to make up 100% of your pre-disability income using insurance money. Since the industry is rife with scams, insurance providers will only be able to cover around 60-80% of your take-home wages. But the good news is that, because you’re more than likely paying your insurance premium with after-tax money, any payouts that you receive will also be tax-free.
Benefits can also take several weeks, or even months, to get to you, whether you have a private disability insurance policy or if you’re hoping to claim against SSDI. Although private insurance typically takes much less time when it comes to approvals, you’ll still need to have all of your paperwork in order and submitted during a waiting period before receiving your money. That’s why it’s always helpful to have an emergency fund or some cash tucked away to help you cover your day-to-day living costs while you wait for your benefits to start.
- Policy premiums are generally cheaper the younger and healthier you are.
- If you become disabled, you are not able to claim benefits if you could do some other kind of work that isn’t your normal role.
- Additional coverage options can be added to most policies to include payouts specifically for student loan repayment or adjustments for cost of living changes over time.
If you guessed “B,” you’re correct! When it comes to your coverage, the type of policy that you take out is going to impact what exactly you can claim for and when. If you’re not able to work in your typical role, but could be reallocated to a different department or pick up some other kind of job, this doesn’t automatically rule you out of claiming your benefits.
With an own occupation insurance policy, you’ll still be able to receive your payouts, even if you take on different work as you recover. These types of policies are usually the most expensive, but they’re the most comprehensive in terms of coverage.
If you’re thinking about taking out an insurance policy, the sooner the better. In general, younger and healthier people are less likely to make a claim so are seen as less of a risk for the insurance company. That means that your premiums will typically be lower. You can opt for additional coverage for an extra fee if you’re worried about covering your student loans or want to account for rises in the cost of living throughout the length of your policy.
- Self-employed people are not eligible for private disability insurance—this is only a perk for those in traditional corporate jobs.
- Disability insurance premiums cannot be considered as a business expense if a policy is paid for with after-tax income.
- Freelancers are still eligible for SSDI, even if they are self-employed and work for no employer other than themselves.
If you guessed “A,” you’re correct! If you’re self-employed, you might be thinking “this is all well and good, but what about me?” Well, you’re in luck! Disability income insurance isn’t just for people in traditional jobs and providers like Asteya understand the unique challenges that come with working for yourself. That’s why we offer no-exam income insurance for freelancers, entrepreneurs, and self-employed individuals so that you can spend more time concentrating on building your business, rather than worrying about the possibility of no income.
Even without private insurance, freelancers are still eligible for SSDI if they’ve been paying into the program through self-employment taxes. But having your own private policy can often save crucial time when you’re waiting for your payouts to start. Like with traditional employees, premiums are usually paid using after-tax dollars, which means your insurance can’t be expensed through your business. But that also means that every single penny that you receive as a benefit is yours to do with as you please, with no taxes due or rules to follow.
Life has a way of throwing wrenches into your plans. But having financial backups in place for those “just in case” moments can make the difference between panicking about keeping the lights on and having the time to concentrate on getting back to full health.
Contact Asteya today to start your disability income insurance application and receive a commitment-free quote within minutes.