According to the Council for Disability Awareness (CDA), “over one in four of today’s 20-year-olds will become disabled before they retire” and the average length of disability is a frighteningly long 31.2 months.
These statistics reflect the fact that illness, rather than injury, is the leading cause of long-term absence from work, accounting for 90% of all disability claims. And even the most safety-conscious among us aren’t immune from disease.
Disability insurance protects your income if you become disabled. With short-term disability insurance, you can expect to receive payment for up to six months, while long-term disability insurance policies can pay out until retirement. Your disability insurance cost will depend on the payout amount that you choose and other factors like your age and health.
As important as disability insurance is for all workers, the self-employed have a particular need to protect their income. But policies for the self-employed can be difficult to find. Here is what you need to know about finding disability insurance when you are your own boss.
What is Disability Insurance?
Disability insurance protects your income in the event that you become disabled. While life insurance and health insurance are important, you don’t want to overlook disability insurance.
There may nothing more valuable to your financial health as your ability to earn income. If for any reason you’re no longer able to work, disability insurance can kick in and replace part of your lost income.
In addition to Social Security disability insurance, there are two types of disability insurance that you can buy–short-term and long-term insurance. Let’s take a look at the difference between the two products.
What is Short-Term Disability Insurance?
As the name suggests, short-term disability insurance is only meant to temporarily replace your income. Here are some of the common characteristics of short-term disability insurance.
- Waiting period: Typically less than 14 days
- Benefit period: Typically 3 to 6 months
- Percentage of income replaced: Usually 60% to 70% of gross income
If you suffer an injury or an acute illness that keeps you from working for a few weeks or months, short-term disability insurance can fill the income gap. But if you’ll be away from work for longer than that, short-term insurance won’t be enough. That’s where long-term insurance comes in.
What is Long-Term Disability Insurance?
Here are some of the key characteristics of long-term…