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Disability Insurance
In the perfect world, we all make it to retirement, live a long life without mishap or running out of smartly invested funds, and we are able to leave to our children a wealth of memories and maybe a little financial legacy as well. But that would be too perfect.
In a perfect world such as that, there would be no need for any insurance products because, well, everything would be risk free. But it's not. We need some insurance of some kind because insurance is more than peace of mind. It is the realization that there is something else to protect in this world than your hide. But when we think of insurance, we think life. One day, I realized that there was more.
I had purchased my life insurance policy at the age of thirty two. I completely immersed myself in the subject and that became one of the catalysts for this site. But life insurance is more a matter of how much you can afford, whether you want to own the policy (whole life) or rent the policy's coverage (term), and how much is enough. These are incredibly tough decisions but they rest on the monetary consequences of choosing one over the other. It comes down to cost.
What I had overlooked was the little talked about insurance that covers injury. Sure, i was well aware that workers compensation insurance would take care of me should I be injured on the job. So 23% of my week was covered. If something happened to me while driving, I was taken care of through auto insurance. That's another two percent. What about the remaining 122 hours?
Enter disability. This is the insurance that covers serious disabling injury off the job when I am on my own time. So I tried to find some.
I knew that 12% of all adults will be laid out by some sort of disabling injury that will last a long time. I knew also that this disabling injury would keep a worker from returning to the job for five years or more. I knew also that the chances of this happening to me was better than not. Statistics prove me out on this one. A 35 year old stands a 1 in 2 chance of a three month long disabling injury before age 65. If you make it to 45, the number decreases some... not a lot, just some.
After I realized this, I found out that through my union, I had a disability policy that would provide my family with $600 (before taxes) for six months. This would mean that I would get 75% less income and after six months, if I haven't recovered, the money would stop. Suppose I wasn't able to return to work? And this is how insurance works on your psyche and riddles it with what ifs and supposes.
First off, asking yourself whether you have enough reserved income to survive this period without worrying about insurance is more than likely the problem of those who do not read the BlueCollarDollar. I determined that this was not a financial possibility for me and my growing family. So reserve money could not be counted on.
I called the insurer who carried the policy for my union and asked if I could purchase more. No. Could I purchase any as an individual? No.
No, I thought was no answer to some one who wanted their product. But no one wanted to sell me any. Now its not that I am totally without disability insurance. In fact, Social Security is a disability policy. So I called over to my local office and actually talked to someone about the coverage that they provided. The man on the phone said and I am paraphrasing, "you have to be almost disabled enough to collect it for death."
This is more than likely where they coined the term "living death". He went on to explain that you have to prove that you can't work. 80% of those that apply get turned down for benefits.
So I found a list of highly rated insurers and started my search. This insurance would have to be inexpensive and it would have to provide income that would sustain my family. It would have to last for a minimum of five years, and if I still couldn't return to the job, I wanted to be retrained at something else. Oh and my wish list also consisted of a cost of living adjustment and provide at least 50% of my income.
I was laughed off the phone at the first ten companies on my list. My profession, even though I was not planning on insuring myself for my time on the job, was what was keeping me from buying what I wanted.
The eleventh company was Provident Life and Casualty. There I found an agent who would at least provide me with a quote. But that wasn't even close to costing what I wanted to pay.
Disability insurance breaks down into several parts. Monthly benefits are usually fixed and extra coverage costs more. There is the "own occ", which means that you are unable to perform the duties of your own occupation, or "any occ" which qualifies you for benefits if you can't do anything at any job within your education range. Then there is the waiting period. This is the time you wait to receive benefits. the longer after the claim is filed, the cheaper the insurance premium. Of course, this is where your ability to survive for a short period of time without an income comes in. And then there is the length of the policy.
The next time the agent and I met, i was more specific on how I wanted the policy written. "Suppose", I said, "the policy kicks in after the six month. Suppose the policy covers only my occupation (which was meat cutter). Suppose we have a rider attached to the policy stating that if I qualify for Social Security they are off the hook for 80% of the monthly payment. Suppose, " I continued, " we write the policy to retrain me if I can not return to work after five years."
Now sometimes you can actually get the insurer to write that last little rider, you can get them to cough up an equivalent amount to what Social Security would have paid, but, working in one of the highest risk groups, I was pushing the envelope asking for what I wanted.
And they went for it. The policy was non cancelable until I was sixty five. I would receive full payment after six months unless Social Security kicked in, and during the first five years of the policy, my benefit increased 2%. The cost of the policy to me is $1.03 per day.
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