Shopping for disability insurance? As a group insurance brokerage company, we understand that disability can be difficult to talk about—much less prepare for. But adding disability insurance to your employee benefits package can provide a lot of peace of mind.
Here’s what you need to know about the different types of disability insurance.
Long-Term Disability Insurance
Compared to other plans, long-term disability insurance is more comprehensive and cost-effective. The benefit period may last 2, 5, or 10 years. Some policies even last until retirement!
Our insurance brokers will be able to help you choose the right coverage for your budget. For example, monthly benefits can reach up to 60% of your gross monthly income. But that amount of coverage will also cost more.
The yearly cost may run between 1% and 3% of your annual salary. While this may seem like a lot, long-term disability insurance can help you save a lot of money in the long run.
There are two different types of disability insurance: “any occupation” and “own-occupation.”
“Any Occupation” Disability Insurance
This insurance only provides benefits if you can’t work any job that you’re suited for (within reason).
“Any occupation” disability insurance tends to be less expensive than other policies. But the tradeoff is that your claim may be more difficult to prove. This may make it more difficult to get the benefits you need in the event of a disability.
“Own-Occupation” Disability Insurance
This insurance defines a disability as not being able to work at your regular occupation.
There are three types of “own occupation” disability insurance:
1. True Own-Occupation
You’ll receive benefits if you can’t resume your old job due to disability. This policy pays you regardless of whether you find new work.
2. Transitional Own-Occupation
This policy pays off if you aren’t able to resume your old job but are able to find a new lower-paying one. You’ll get monthly benefits to make up the difference between your old and new salaries.
3. Own-Occupation, Not Engaged
If you’re unable to continue working your old job, you’ll only get benefits as long as you’re unemployed. Once you start a new job, your benefits will stop. This is regardless of what type of new job you take.
Short-Term Disability Insurance
According to the , the average disability lasts about three years. The only problem is that short-term disability insurance doesn’t pay for more than a year.
That’s why we recommend supplementing this type of policy with long-term disability insurance. This allows you to cover living expenses while you’re waiting for your long-term disability payments.
Short-term disability insurance can replace up to 80% of your pre-tax income.
The only drawback is that short-term policies cost about the same as long-term ones. For this reason, short-term policies aren’t as cost-effective.
Start Shopping for Group Insurance
Michigan Planners is big enough to serve, small enough to care.™ As group insurance brokers, we’re proud to serve small to mid-sized businesses. To learn more about the different types of disability insurance and start comparing quotes, call (800) 674-9235.