In quoting thousands of disability insurance policies, we come across many similar long-term disability questions from consumers.
We are proud that High Income Protection is a “go to” source on the internet for answering any and all disability insurance questions that you want or need the answer to.
This page is constantly updated. If you have a question that’s not here, please feel free to contact us either via phone or through our web form. We’re happy to answer any long-term disability questions that you might have.
You’ll probably even see your question (and our answer) featured on this page!
Long-Term Disability Questions and Answers
What is disability insurance?
Disability insurance protects your income if you’re unable to work due to sickness or injury.
There are a lot of ways in which you might be covered if you’re unable to work.
You may be covered automatically by social security, your state, or workers’ comp (for on the job injuries). Other plans can require voluntary enrollment such as group plans through work or supplemental coverage through a company like AFLAC.
At www.highincomeprotection.com, we specialize in individual disability insurance, the kind of personal paycheck protection that you purchase on your own.
What is personal disability insurance?
Another name for individual disability insurance, personal disability insurance is simply coverage that you purchase on your own.
It normally pays a set benefit amount based on your income when the policy was issued. You can normally make a claim for any reason that prevents you from doing your job, whether it be related to sickness or injury.
Personal disability insurance goes by a lot of names on the internet. We see long-term disability question searches by people looking for income protection insurance, paycheck protection, and a lot of other names.
Most of the time, these people are all looking for the same product: individual long-term disability insurance.
What’s the difference between short-term and long-term disability insurance?
One of the more popular long-term disability questions is “what kind should I buy?”
There is a lot of confusion as to what separates a “long-term” policy from a “short-term” policy. For the most part, there are two components that differentiate these two types of policy.
First is the benefit length or the benefit period. This is the amount of time that the policy will pay claims should you become too sick or injured to work.
A long-term disability insurance policy is typically going to have a benefit period of at least 2 years, and in most cases will last 5 years, 10 years, or even until retirement at age 65 or 67 (or even older).
A short-term disability insurance policy will normally cover the insured person for anywhere from 3 months to two years.
The second feature that separates these two is the elimination period or the waiting period.
The amount of time that you have to wait to make a claim is normally 90 days on a long-term disability insurance policy. While some of these policies have the option to see a shorter wait time (such as 30-60 days), the subsequently increased cost normally makes little sense.
We do see much longer wait times, such as 180 or even 365 days, added to long-term disability insurance, as this reduces the cost. Some people are financially comfortable to the point where they could miss 6-12 months of income. In most cases, these people are buying disability insurance because they are more concerned about being out of work for years, not months.
Short-term disability insurance has much shorter wait times. You can find policies with elimination periods as small as 0 days for accidents and 7 days for illnesses.
Of course, the shorter wait times make these policies more expensive, but for those who live paycheck to paycheck, missing even a few weeks of work could be catastrophic.
Do I need disability insurance?
Could you retire today if you had to?
If the answer is yes, then you probably don’t need disability insurance (although people who are well-off but still not retiring for several years still purchase coverage).
If no, then you should own disability insurance. How much, group or individual, from what company, and all of the other long-term disability questions are up for debate.
Educate yourself, decide on what you want, and talk to us. We can help.
How long will my disability policy last?
This question comes up quite a bit. When we quote a disability insurance policy, we provide a brief summary of potential policy designs.
On that summary, you’ll see options such as a 5-year benefit, a 10-year benefit, and up to age 65 or longer. Sometimes, people confuse disability insurance with term insurance and make a statement like:
I need my policy to last more than 10 years!
Long-term disability insurance has three main “time-based” numbers that are associated with it. One is your guaranteed renewable period. The other two are your benefit period, or length, and your elimination period, or waiting period.
The confusion is normally between the guaranteed renewability and the benefit length.
The guaranteed renewable period is the timeframe that you can keep your policy without the carrier making any changes* to it. As long as you pay your premiums on time, you can keep your policy for the entire guaranteed renewable period. Typically, this period is to age 65 and beyond (depending on the company).
*Any ChangesThis is an important note. When the carrier says that they can’t make changes to your policy, they are referencing the policy itself (benefits amount, length, definition of disability, etc.). They CAN change your premiums. One way to prevent this is to purchase a policy that is not only guaranteed renewable but also non-cancelable (I know, it would make more sense if it was the other way around). A non-cancelable policy cannot have the premiums changed (increased).
The second time-related component that you’ll see in a disability insurance policy is your benefit length or benefit period.
The benefit period is the maximum length of time that you can be on a claim.
So, if we consider a policy with a 10-year benefit length, then you can keep that policy until age 65 (and possibly beyond), however, a claim can only be made for a maximum of 10 years.
Said another way, a 40-year-old could purchase our example policy, keep it for 15 years, then go on a claim at age 55 and have benefits paid until he or she is 65. By that time, he or she would have owned this 10-year benefit policy for 25 years.
How much disability insurance do I need/What’s the most I can get?
Most people are unsure about how much disability insurance coverage they need. We get long-term disability questions from consumers that range from “How much should I buy?” to “What’s the most disability insurance that I can get?”
You should own enough long-term disability insurance to cover your living expenses, in case you were to be out of work due to sickness or injury for an extended period of time.
To be more specific, at a minimum, your disability policy should cover your mortgage, utilities, groceries, and any other essentials.
The average claim is from 31–34 months so you’d also want a policy that covers you for at least 3 years.
Ideally, your policy should cover more than just the bare minimum. Owning a policy that allows for retirement savings (in addition to lifestyle expenses) while on a claim and lasts for the majority of your working years is optimal.
The maximum coverage allowable is based on two things: the company that issues your policy and your actual earnings.
Most disability carriers have a maximum issue limit. This number is normally around 20k/month. A few carriers will go higher and specialty companies, such as Petersen’s International, may go upwards of 100k/mo.
The second factor is your actual earnings. You can’t request 15k/mo in benefit amounts when you’re only earning 12k per month.
Companies will only issue a policy based upon a percentage of your earnings (typically 60–65%). They will also include other coverage in their maximums, such as your group policy or another individual policy. Those policies may or may not offset… it depends on each type of coverage and the policy wording.
If you feel that 65% of your earnings isn’t enough to live on, there is some good news.
When purchased privately (with after-tax dollars), individual long-term disability insurance benefits are tax-free.
How many disability insurance companies are there?
Believe it or not, there are relatively few insurance carriers that sell individual long-term disability insurance.
“Individual” is the key word there, as there are many more companies that offer group coverage (through your work or trade associations).
For the purposes of this discussion, we’re only talking about individual coverage, which is the type that you can buy on your own, without any employer/association/government requirements.
While there are no hard and fast rules, you do see certain companies being more appropriate than others based on your occupation.
Popular disability insurance companies for white-collar occupations include Guardian/Berkshire, Principal, Mass Mutual, Northwestern Mutual, Standard, and Ohio National.
For blue-collar workers, you’ll see companies like Mutual of Omaha, Illinois Mutual, Assurity, and Ameritas being quoted.
There are a few specialty companies as well, such as Fidelity Security (which offers policies for people in less than ideal health) and Petersen’s International, a U.S. cover-holder for Lloyd’s of London.
The most important thing is that you work with an agency that specializes in disability insurance and has the ability to shop around for your policy with multiple carriers. This will help you to find the best policy and pricing for your needs.
Which disability insurance company is best?
All of them.
Well, not really. The best disability insurance company is the one that fits your needs and goals AND will offer you a policy for the right premium.
People with health conditions may only be eligible for certain policies or may pay higher premiums from certain companies.
Some professions require specialty-own occupation coverage, whereas others can get by with stricter definitions of disability.
Not everyone needs maximum coverage since some people live well below their means.
Unlike some other types of insurance, disability insurance isn’t something that you should buy without really understanding all of the moving parts. What’s right for you may not be what’s best for your neighbor or coworker. Know the policy design that you want by reading this site and/or talking with us and then we’ll shop for the best company based on your objectives.
One of the most popular long-term disability questions is which company is best? The answer is unique to each individual.
Can I get a long-term disability insurance policy if I’m newly self-employed?
Yes!
Next question.
O.K. Let’s expand on that a little
Ideally, you’ll be self-employed for a few (2+) years and have filed tax returns for those years to be able to access all of the disability insurance companies available to you.
That being said, there are several companies that will issue policies to those leaving the warmth of the corporate blanket and striking out on their own before two years has passed.
Each carrier has their own program for newly self-employed disability insurance but most use the following criteria:
- The insured should be in the same profession/role as they were previously
- Income is calculated using a formula that is different than normal
- Having guaranteed contracts (attorneys, consultants, etc.) can bump your income
Again, depending on the company we choose, the disability insurance benefits available to you will vary.
Most disability insurance will calculate your maximum benefit based on a percentage of earnings (normally 60–65%). For those who are newly self-employed, that percentage doesn’t change.
What does change is the income from which they base that percentage. Since you don’t have any current documented (filed) income, carriers with “start-up” plans will take an average of your last two years of income and apply a percentage (50–75%) to project your future income.
For ExampleA marketing executive earned 200k in her last two years working for a large corporation. She decides to make it on her own as a marketing consultant. The company takes her 200k average and multiplies it by 75% (arriving at 150k). They use that number to then compute her maximum benefit, which would be about 100k/yr (150k x 65%).
If you’re truly starting your own business without any previous earnings/background, then you will have extremely small limits if you’re offered a policy at all.
The exception to this rule would be if you’re a medical, legal, or accounting professional. Many companies have starting practice limits for those who wish to purchase disability insurance. In some cases, even while they were still in school/training.
Does disability insurance cover pre-existing conditions?
That depends.
Group coverage, the kind that you get through work, may cover a pre-existing condition after a waiting period. Guaranteed standard issue, or GSI, will do the same. (GSI policies are typically added on top of a group policy to provide more coverage than what would normally be available under the group.)
For individual disability insurance, this is rarely the case.
Existing health conditions will affect your disability policy in two ways: ratings and exclusions.
Ratings are normally applied to general health conditions such as unfavorable height/weight ratios or systemic diseases (heart issues). While a disability due to the condition may be covered, ratings are not ideal.
A rating will increase the cost of your policy.
Exclusions are for more specific conditions, such as a bad back or a history of anxiety. A disability insurance policy with an exclusion will not pay claims for missing work if the absence is caused by an excluded condition.
Exclusions do not raise your policy cost.
If you have a long-term disability question about a specific health condition, feel free to reach out to us. Know that, even if you have a rating or exclusion, your policy will still cover you for the myriad of other health issues that can cause you to miss work for an extended period of time.
If you have a pre-existing condition, start with your group policy (if available), then explore other options.
How do I apply?
There are three main parts to a long-term disability insurance application.
The first is the actual application itself. Depending on the company, it may be filled out via eApp (and e-signed), traditional paper and pen, a tele-interview (and voice signed), or a combination of these.
Once that’s complete, the underwriting process begins. There are two elements to underwriting: medical and financial.
Medical underwriting normally involves a paramedical exam, prescription drug checks, and a review of your medical records. As the potential insured, the only thing that you normally need to do is complete the 30-45 minute exam, which can take place at a location of your choosing (home, work, etc). The insurance company takes care of the rest.
Financial underwriting is a review of all pertinent tax documents. Disability insurance is based on income, so it is necessary to verify that the amount you’re applying for matches the company’s limits for insurance. Most companies allow for 60-65% of your pre-tax (but after expenses) earnings to be covered.
Once the application, medical information, and financial documentation have been reviewed, then the insurance company should be ready to make their decision.
What is a paramedical exam?
A paramedical exam is part of the underwriting process for many different types of insurance. A certified medical professional will come to your home or work (or anywhere that’s convenient for you) to perform an exam. You can book most hours of the day and even weekends (depending on where you live).
One of the long-term disability questions that we get is “how does the exam work?”
The exam consists of questions regarding your medical history as well as a series of diagnostic tests. These may include blood pressure, pulse, height, and weight. There will also normally be a blood draw and a urine sample. In some cases, the insurance company may require an EKG or a saliva sample.
All of the data gathered is then provided to the insurance company to help them make their decision regarding your long-term disability insurance policy.
Do I have to take an exam?
No.
An exam is not always required. There are several opportunities to get a no-exam disability insurance policy.
Typically, an exam will not be necessary for one of two reasons.
#1 The product does not require it (simplified issue)
#2 The amount that you’re applying for is below a certain threshold.
Normally, we don’t specifically apply for policies that don’t require an exam. We do get long-term disability questions about circumventing an exam and if that’s the route that you prefer, we can do that. If one of those policies fits your needs and goals then great; it is one less step that we have to take to get you income protection insurance.
Also, it would be rare to take fewer benefits than what is desired just to skip the exam. The exam normally works in your favor, allowing for better benefits at a less expensive cost. While that is not always the case, it often is.
I’m self-employed so I don’t show a lot of income…
While this is more of a statement as opposed to one of our long-term disability questions, we hear it often.
Since you’re self-employed (otherwise you probably wouldn’t be reading this section), have you ever tried to get a mortgage? Getting disability insurance is similar in the sense that only what is going out of the business and into your pocket gets counted.
Here is the challenge with disability insurance from a financial underwriting perspective. The company’s guidelines only allow them to cover a certain portion of your income. Anything that you write-off is not considered income (since you don’t pay taxes on it) and therefore it isn’t taken into consideration.
When it comes to reviewing your finances, the insurance company is normally only looking at your personal adjusted gross income (income after expenses but before taxes, personal exemptions, and certain deductions).
They will not consider unearned income that continues even if you’re totally disabled, nor will your spouse’s income be used in the calculation.
Can I cover my business if I become disabled?
Your business is an asset, and if you were to become disabled, would you be able to keep it?
Maybe you’re well-off financially and could survive not working for a few years. Or maybe a personal disability policy wouldn’t be enough income for you to keep up with business expenses. Either way, the disability insurance companies have come up with a product to overcome this obstacle: business overhead insurance or BOE.
BOE protects your business if you, the majority equity holder, become disabled and can no longer work. It can cover expenses such as payroll, lease/rent/mortgage payments, certain insurance payments, and other costs associated with running a business.
Business overhead expense coverage is there to make sure that your business can still open its doors if you cannot work.
BOE normally has a shorter elimination period (waiting period) the traditional disability insurance, and it also has a shorter benefit length.
In addition to the shorter wait to go on claim, another positive attribute about BOE is its cost. Business overhead expense is typically less expensive than an individual disability policy.
Many business owners choose to purchase both individual long-term disability insurance and a business overhead expense policy.
How much does disability insurance cost?
When prospective clients submit a request for a quote, we normally email them with a few more long-term disability questions not found on our form. One of those questions is: “how much income are you looking to protect?”
In many instances, the response includes a number with a caveat: “how much does disability insurance cost” or “depending on how much it costs.”
Like everything thing else in life that we purchase, most people are fairly price-sensitive when it comes to their disability insurance premiums.
There are several factors that go into pricing a DI policy but to simplify, outside of your health, there are 6 major factors: your age, gender, occupation, the benefit length, the benefit amount, and the waiting period.
You can’t really do much about the first three, but the last three can be customized to fit your premium budget.
A general rule of thumb is that disability insurance is typically going to cost anywhere from 1-4% of the income that you’re looking to protect.
The younger you are, the less expensive your policy will be. Also, if you’re in an occupation with minimal stress and no manual labor (accountants, office workers, etc), then your policy is likely to be at the lower end of the cost spectrum.
Unlike life insurance, with disability insurance, women pay more than men (due to a higher incidence of claims).
We can typically adjust benefits to meet any premium need and still have meaningful coverage.
We provide free examples of long-term disability insurance pricing. If you’d like to run a disability quote without providing contact information to get an idea of costs, feel free to do so.
If you’d prefer to get something that’s much more personalized, please complete the disability insurance quotes form on the left and we’ll be in touch.
What is a social insurance supplement rider?
One of the long-term disability insurance questions we often get is in regards to a quote that the client has received from another agency. Sometimes, you’ll see a policy quoted with an “SIS rider” or an “SI supplement”.
They may go by a few different names, but social insurance supplements all have mainly the same characteristics. Not all disability insurance companies offer social insurance supplement riders, but for those that do, it is a way to decrease the overall cost of your policy.
These riders are typically added to a policy by the insured by choice. Essentially, if you were to go on claim, an SIS rider will offset some of your monthly benefits by whatever you received in additional benefits (such as workman’s comp, social security disability, or state disability).
So, if you had a $5,000 per month total benefit with $4,000 of that being base and $1,000 of that being a social insurance supplement, you may receive all 5k from the insurance company (if you didn’t qualify for state or federal benefits), or you may receive 4k from the insurance company and the remaining 1k from another source.
If that other source paid more than 1k in benefits, you could theoretically receive more than 5k in total monthly benefits. If the third party (typically a government) paid less than 1k, the insurance company would have to make up the difference.
The linked article above goes into much more detail. Please feel free to contact us or complete the quote form on the left to see if one of these riders is right for you.