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Disability Insurance: What is It & Why You Need It

Published by Robert J Stillwell on June 20, 2019


What is Disability Insurance?

Disability Insurance is protection of your income when you are injured or become sick or mentally ill and can no longer work or earn an income. 

Think about it for a second – what would you do if an injury or illness prevented you from working for anything longer than a few months?

You might have some money in savings or in a rainy day fund that you can access.  Maybe you have to sacrifice a vacation you were planning.  Both of these are relatively easy to deal with in an emergency when we’re talking about your health.

What happens when those funds run out?  Do you start pulling money from your retirement savings?  What about from the money you were saving for your kids’ education?  Do you sell your house?

Paying for gas, groceries and for a roof over your head are immediate needs that can’t be sacrificed.  Being unable to earn an income for anything longer than a few months can be devastating to your financial future.  This is what Disability Insurance protects you from.

Why is Disability Better Than Workers Compensation?

For Workers Comp coverage to apply, the injury or illness suffered must occur as a result of your occupation.  For injuries sustained outside of work, or for non-occupation related illness, there is no coverage under Workers Compensation, but there is under Disability Insurance.  In addition, the amount of income replacement available – especially for a business owner – is typically much higher under a Disability policy. 

How Much Does Disability Insurance Cost?

There are a lot of factors that go into determining the premium for the policy.  Pricing will typically fall between 1% – 3% of your annual income but every case is different.  Some factors include:

  • The type of work you’re doing.  If you’re doing different types of work, we typically try to go into more detail and identify how much time you’re spending in the various job responsibilities you have. 
  • How much income you earn.  This can include not only your payroll, but dividends and passive income.
  • Your health.  We’ll need information on your height and weight as well as any existing medical conditions you have, any medications you take, or any previous injuries you’ve sustained. 

Disability policies are medically underwritten which means the carrier will pull medical records and will typically require blood and urine samples. If you have existing or previous medical conditions or illnesses, a disability insurance policy may exclude these things which makes getting coverage before these things crop up is very important. 

How to Obtain Disability Insurance Coverage

Obtaining coverage starts with a conversation about your needs.  We’ll review your current income and where it comes from, and your expenses, then talk about what you’d need to maintain your lifestyle (or as close to it as possible).  We’d need to review any coverage you might already have in place as well as your medical history. 

We would then find the right carrier for you, discuss the coverage options available and determine the best carrier to provide coverage that fits into your budget while protecting your income and your future.

What else should I know?

 “You are four times more likely to lose an employee to a disability than death.”

Disabilities occur more commonly than you would think.  One in four people suffer at least one disability in their life and less than 10% of all disability claims are the result of accidents or injuries.  Disability Insurance comes in many forms and is an excellent way to help manage the risk your business has for injuries to key people.  Some of these include:

  • Business Overhead Expense to keep your business open by providing funds to pay your business’ expenses such as rent, bank loans and employee salaries.  Can your business survive losing the owner for more than a month or two?
  • Key Person Insurance – you are four times more likely to lose an employee to a disability than death, yet Key Person Life Insurance is much more common.  Key Person Disability policies pay the business when you lose a key person to a disability – what happens to your business if your top salesperson is disabled for any significant length of time?
  • Funding a Buy Sell Agreement with Disability.  Again, you’re much more likely to trigger a Buy Sell Agreement with a disability than death, but the disability portion may not be funded.  How would you manage to buy out one of your partners if they were disabled and couldn’t return to work?

How to Get Disability Insurance

For now – here’s what to do:

If you or your family depend on your income, protecting that income is one of the most important things you can do.  Acknowledging the fact that we might become seriously injured or sick is a hard thing to do, but it is so important that we do it.  Call me (215-643-3490 x23) or email me ( or submit your contact info through our form below and we’ll get in touch with you soon. 

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