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Disability Insurance

Disability insurance

Americans are six times more likely to be unable to work for an extended period of time than to be killed by accident during their working years. Luckily, the risk of this happening while being unsupported by short term disability insurance can be avoided! 

It starts with risk mitigation. 

Risk Mitigation 

Let’s examine some common methods of risk mitigation. 

What is risk mitigation? Risk mitigation is the strategy created to ensure proper preparedness in the case of threat to well-being, sustained support and stability. Risk mitigation is important because ignoring the risk, when knowing the statistics and probability of risk, surely can’t be justified. 

Having a conversation with your favorite risk manager or insurance agent is an incredible first step in risk mitigation. The conversations alone could divulge some hidden info- 

Who is at risk? 

What will income replacement cost to insure, without “self-insuring,” or taking the risk completely. 

How can the risk be shared? What levels are needed? What are the options to buy more? Etc. 

PLEASE REMEMBER: only FIVE states have state-managed and state-provided short-term disability income replacement plans. This is a tax-funded program to replace income for persons that are injured that may not have other means of generating “unearned” income while out of work temporarily or permanently.

The five states with state disability plans are California, Hawaii, New Jersey, New York, and Rhode Island.

But how is that different from the federal disability services and support, otherwise known as Social Security Income (SSI)? This federally-managed system provides social security income and disability benefits to persons that are disabled by SSI definitions and can therefore earn SSI before the minimum mandatory “retirement age” identified in the Social Security Administration website. This long term disability income is available in all 50 states.

Even with these benefits in place, many individuals still purchase additional private insurance. This is due to a social security income benefit cap that limits the amount of financial support released. Sometimes the choice is to buy insurance for a known premium so that if the individual is disabled by their selected insurance company’s definition, they receive high amounts of “after tax” income under some circumstances, and “pre tax” amounts under others.

While the federal government does have a social security disability plan (SSI), filing a claim for social security benefits can be difficult, and time-consuming. The common thought comes up that maybe it just makes more sense to pay a little for personal protection and take control of that risk. Some states have benefits online and associated claim processes, but some still utilize hard copy documents. Processes and outcomes are as varied as the Americans filing for benefits.

Again: A big factor is the individual’s risk tolerance acceptability level.

Disability Insurance & Employment Requirements 

If you are an employee of a company that facilitates worker’s compensation, then your employer is most likely required to cover you for on-the-job injuries, illness, and death. This requirement is dependent on your company’s state of domicile and where you physically work. 

Coverage limitations can be financially crippling, if you are a high wage earner. Only one state does not require employers to provide and fund some level of worker’s compensation & employer’s liability. That state is Texas. This does not mean that employers won’t be held responsible, it is simply not a legal requirement. What a risk!

However, if you are self-employed, and can’t or won’t cover yourself on worker’s compensation & employer’s liability, then you may want to consider “covering your income” on an insurance product like Disability Insurance. 

Also considered, is that worker’s compensation only covers employees or owners (if “included”) while in the scope of employment– that means, while “on shift” or “on the clock”. 

Disability Insurance tends to be 24/7 365 coverage. 

Some more good news in favor of covering owners on worker’s compensation & employer’s liability: if the work itself is not high-risk or dangerous by definition, owners and employees authorized by job description to drive a vehicle (their personal vehicle or a company-provided automobile) are covered while in, on, under, or around the vehicle. 

So, consider how the risks for worker’s compensation & employer’s liability may be very high for tree fallers at a logging company. Now consider that the owner may have moved from tree falling into management, sales, etc. and is no longer falling timber. That person, if appropriate, were to be covered in an office classification and their rates for coverage are extremely low. But they may also run to the bank, Costco, the post office, to see their business attorney, etc. If that person is in the scope of employment, and gets injured in an auto accident while performing one or more of these tasks, then because they were working for the company during the accident and on company business, their worker’s compensation & employer’s liability policy would likely coordinate with the auto insurance policy in place on that vehicle. Between them the injuries, transport, after care costs would likely be covered, as well as any long-term costs directly or indirectly experienced due to the resulting medical condition. 

Overarching statements like “always”, “will”, “will never”, “won’t, “never”, etc. arent often used because in different states different policies mesh or do not mesh in accordance with that jurisdiction. Don’t take any of these statements as gospel, but as conversation starters with your trusted professionals!

Every company’s product is unique, but consider these cases:

  •        –A top brain surgeon takes a tennis ball in the eye socket and loses 50% of his sight in that eye, decreasing her depth perception to the point that she can no longer practice.
  •        – Russell Wilson trips over an extension cord at the Grammy’s in which Ciara won yet another award and experiences a compound fracture of his throwing forearm bones, ending his NFL career.
  •        – A private RN suffers a minor stroke, however he has to surrender his license until he can re-test to be allowed to practice medicine again.
  •        – A registered investment advisor loves to ride his street bicycle, but is run off of the road at a high rate of speed by a driver who seems to have been texting or otherwise disengaged. The RN then loses her short-memory due to having a traumatic brain injury.

If appropriate disability benefits insurance was in place for any of these specialists, they could either be retrained to service their clients/patients/customers in other ways. 

However, if coverage is endorsed properly, and if they are unable to perform their “own occupation,” then their income can continue after a short waiting period. Typically, wage earners are seeking monthly benefits for income lost due to something, which is reasonable.

To reiterate: Make no hard decisions based on this article. But please DO contact your risk manager or insurance agent to talk about the “whys” and “what-ifs” that come to your mind due to your unique lifestyle choices. You don’t know what you don’t know until you know.

You can contact us to review your policy, get a new quote or discuss available discounts by calling us at 541-482-0831, or request a quote online.

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