RICHMOND — Many Americans may consider their home, car or precious heirlooms their most valuable assets, but what about the ability to work and earn a living? Illness or accidents can render you disabled in an instant. In fact, according to the Social Security Administration, more than one in four of today’s 20-year-olds will become disabled before they reach retirement age.
If that happens to you, how long could you and your family go without a paycheck and maintain your lifestyle?
The State Corporation Commission’s (SCC) Bureau of Insurance reminds Virginians that disability insurance can provide income protection when you cannot perform your job duties or earn a salary due to an injury or illness not related to your job.
There are two types of disability insurance – short-term and long-term. Short-term disability may occur due to pregnancy, certain injuries and joint disorders. Short-term disability insurance will typically replace a portion of the policyholder’s salary for three to six months. Among the most common causes of long-term disability are cancer, heart disease and back injury. Long-term insurance coverage will generally begin six months after the disability begins and can last for years or even until retirement age.
“For most people, income protection is vital to your overall financial wellness,” said Virginia Insurance Commissioner Scott A. White. “Disability insurance can help mitigate your risk of financial disaster by protecting you against loss of income due to accidents or illness. We protect our other assets such as homes and cars – why not our income?”
White encourages Virginians to shop around for disability insurance and compare products and prices. Among the key factors that may impact your premium costs are occupation and job duties, gender, health history, benefit period (the length of time for which an insurer will pay for a disability), waiting period (the amount of time you must be disabled before a benefit is payable) and policy provisions (for instance, a policy that pays for both total and partial disability will be costlier than one that pays only for total disability).
“Make sure you understand all provisions of the policies you are comparing,” White said. “Contact the insurance company, agent or Virginia Bureau of Insurance if you have questions.”
If you are considering purchasing long-term disability insurance, determine beforehand how much income you need to meet critical financial obligations such as rent or mortgage payments, food, car payments and fuel, utilities, other loans, insurance premiums, credit card debt, children’s education and health care expenses not covered by insurance. Also consider any other non-salary sources of income including investments and resources such as employer-provided sick leave and how long they will last if you become disabled and cannot work. Factor in as well whether you have existing disability insurance through your current job and consider what it covers and for how long.
When comparing disability insurance policies, make sure you understand how the company defines disability, the types of disabilities covered, the amount of benefits the company will pay and for how long, waiting periods before coverage kicks in, length of coverage, renewability and inflation protection, among other things.
No matter what type of insurance you are purchasing, make sure the company and agent are licensed and the company is in good standing. For questions or additional information, contact the Bureau of Insurance Life and Health Division in Richmond at 804-371-9691 or toll-free at 1-877-310-6560. You may also visit the Bureau’s website at www.scc.virginia.gov/boi/index.aspx or the National Association of Insurance Commissioners’ website at www.naic.org/documents/consumer_alert_simplifying_complications_disability_insurance.htm.