Protecting your income is one of the most important things you can do for yourself and your family. If you recently became injured or sick at your job and couldn’t work for a while, you will need a good option to make you feel financially safe and secure at home while recovering so you can get back to work. Unfortunately, many employees, including accountants, can’t afford to pay the everyday expenses that this scenario entails, if unable to work for a prolonged period of time.
If you’re unable to work for a while, and you don’t have any income coming in or enough savings available, and you won’t be able to afford your expenses including mortgage, rent, utilities or other monthly expenses, then disability insurance is something that can help offset your bills. If you’re an accountant who identifies with this scenario, you should consider getting individual disability insurance for accountants.
Most people do everything within their power to protect their most valuable assets, properties, and families through an array of insurance policies, such as homeowners, auto, life, and health insurance. However, rarely do they even consider protecting their income stream.
Disability insurance provides coverage that can help you cover your needs in case that you aren’t able to perform your duties at work and generate income. With that in mind, let’s discuss why you need disability insurance, what it is, and how to choose the right policy.
What is Disability Insurance?
Disability insurance for accountants is coverage that makes up for part of an accountant’s income when they cannot work due to disability or illness. This type of insurance coverage provides useful benefits that cover on average up to 60% of an accountant’s salary.
Disability insurance includes two coverage options:
- Short-term disability insurance – covers lost income for six months or less. It’s the most common insurance coverage for accountants who have exhausted other workplace benefits like sick leave and paid time off.
- Long-term disability insurance – sometimes, disability can last longer than six months, and in such scenarios, long-term disability coverage makes more sense. This coverage makes up for a portion of your income, ranging from 50% to 70% in most cases. The policy can span over periods of just a few years or until retirement, depending on the type of coverage you opt for.
Where to Get Disability Insurance for Accountants
You have two options for getting disability insurance – you can either buy it on your own or at work, through your accountant firm. Work-based disability insurance coverage can be quite affordable and easy to purchase. However, it comes with a downside.
Since it isn’t transferable, you may have to cancel your policy if you change jobs. There is also the fact that only about 25% of private work sector employees have the option to buy disability coverage policies.
Individual disability insurance provides a worker with more options and increased flexibility regarding policy management. Even if you change jobs, you won’t have to forfeit your policy, no matter how frequently you change companies.
In addition, you also get the option to choose the period you want insurance in place. Your individual disability coverage premium will depend on an array of factors, including occupation, health, and age.
Reasons To Consider Getting Individual Disability Insurance for Accountants
First of all, every working human being needs individual disability insurance because they are prone to incidents and accidents. No one thinks about these things as long as they feel good and healthy. However, if you get disability insurance after being injured or sick, it might be too late.
Anything can cause an accident, and there are simply way too many variables to consider. You could get sick on vacation or get injured in a traffic accident. Since it’s always better to come prepared for whatever may come, it’s better to think about insuring yourself against all odds.
Aside from injuries, one of the biggest reasons workers can’t work is illness. Instead of losing your income, you can rest and recover from your injury or illness, knowing that your income is safe.
Disability Insurance Provides Coverage for Your Monthly Expenses
Think about all the monthly expenses that your lifestyle implies and that most people take for granted simply because it’s normal for them to support their lifestyle by their income.
What happens when you’re unable to generate income?
Your mortgage, daycare, healthcare, and other expenses tend to build up quite easily and bleed dry your budget in a matter of weeks, even days. Instead of focusing on your healing, you’ll find yourself injured or sick, with so many concerns weighing heavy on your mind.
That’s why it’s a smart choice to have a disability insurance policy that can provide financial support and help maintain your lifestyle, family, and household, and at the same time allow you to take mental space and afford the time it takes to get better and recover from your medical challenge.
How To Know How Much Disability Insurance You Need
Getting group long-term disability coverage through your accounting firm is the best option to avoid complicated calculations. However, long-term policies may not be sufficient to cover all your monthly expenses and necessities. Most long-term disability policies cover about 60% of your income, but you have to include taxes in the equation.
Your take-home coverage goes down to about 40–50% of your real income when you deduct taxes. Thankfully, you can also consider getting supplemental disability insurance to make up for your monthly income and keep your financial situation stable and liquid.
The best way to easily determine how much coverage you need is to look at your monthly budget and review what could be removed as an additional cost and what is necessary. That should give you a clear picture of how much coverage you need to replace your income.
The Cost of Disability Insurance for Accountants
The cost of disability insurance coverage ranges from 1 to 3% of your standard income. However, before you decide to invest in a disability insurance policy, you need to take your medical history, other insurance policies you might have, income/job status, and health habits into consideration, as well as your monthly budget.
All this combined should give you a clear picture of how much you’re comfortable spending.
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Top Things To Consider When Choosing Disability Insurance for Accountants
When it comes to the definition of disability, you’d be surprised by the sheer number of different ways to define disability. The key to getting the best disability coverage premium for your unique needs is to fully understand what disability is and what it entails.
Essentially, a disabled worker is a worker who cannot perform the job duties of their occupation. After one year, the disability standard may shift in terms of a disabled worker being unable to perform any occupation.
In such a case, a disabled worker will have to prove they are unable to perform at any job. If they manage to prove it, they will be eligible for earning some percentage of their former income, usually 60–80%.
One of the greatest concerns when deciding to buy disability insurance is the portability of your coverage. If you get it through your accounting firm, chances are that it may not be portable. In other words, if you leave the firm, you won’t be able to use your policy anymore. Make sure you get all the benefits of insurance.
It is always a better option to have a portable insurance premium policy that provides financial support no matter where you work. If your employer only provides non-portable policies, consider buying disability insurance on your own.
Disability insurance premiums vary from insurance provider to insurance provider. Some insurers allow users to lock in a premium, while others don’t. Premiums can also be non-cancelable or guaranteed renewal policies.
Since you have many options and they greatly differ, it’s paramount to assess your short-term and long-term needs to determine the right type of premium. In most cases, accountants opt for a guaranteed renewal premium as it gives them the additional option of renewing without altering the coverage. However, your premium may fluctuate in such situations.
Non-cancelable disability insurance doesn’t allow the user to alter coverage in any way, meaning that you cannot change your premium either. However, this is only valid if you’re making your monthly premium payments on time.
Cost of Living Benefits
Most disability insurance policies don’t cover the cost of living benefits, but this cost is one of the main determining factors when you’re deciding what kind of disability insurance you need. This cost is meant to provide additional financial support and stability by offering access to various benefits, such as earning interest on a compounding basis.
Compound interest is earned by combining the interest and the principal. Aside from allowing you to save some money by doing smart math, this additional interest is an excellent way to cope with inflation even after your disability.
Residual benefits provide additional financial support to make up your income if you can only work partly. They provide coverage for the rest of your salary. When opting for disability insurance for accountants, make sure your insurance company doesn’t put any limitations on your residual benefits or tweak them in any way.
The collection period is perhaps the most important factor when choosing an insurance company for your disability coverage needs. The collection time can greatly vary, ranging from 30 to 700 days. Some insurance companies start collecting as soon as one month after your disability claim has been filed.
Insurance companies, money lenders, and pretty much all other financial institutions reserve the right to change the terms of lending at any time. The same goes for your disability insurance policy. Your insurer can alter the policy at any time. They can raise the interest rates, whether your policy is up for renewal or not.
Some insurers even go so far that they change the terms of coverage without giving policyholders the option to renew. To avoid additional expenses you don’t need – you must understand how and when your insurance company can make any changes to your policy. Also aging and long term care are important topics to check out.
You should consider the option of getting a future increase in addition to your disability insurance premium. That goes for all workers who think their income may increase over time. Make sure you remember this when applying for disability insurance.
With this additional option, a policyholder can increase the monthly benefit of their coverage, regardless of their health status at the moment. If you want to ensure full income protection for the future, the future increase option should be your priority.
The renewability provision of your disability insurance policy is the determining factor of how long you can expect to be insured. The insurance company shouldn’t be able to cancel your guaranteed renewable coverage even if a change in your health puts you at a greater risk.
However, the company can still change your premium. The main benefit of getting non-cancelable disability insurance is a guaranteed future premium.
Final Thoughts on Disability Insurance for Accountants
Choosing a disability insurance policy to cover you when suffering an illness or injury isn’t an easy task at all. There are so many factors to consider and so many things to keep in mind. Since many insurance companies offer policies that can deduct or offset social security disability benefits, choosing the right policy for your needs may be even more challenging.
However, this guide could show you how to find the best option for your disability coverage needs. Each worker is different, and each policy option offers different coverage and additional benefits.
If you feel overwhelmed from having so many options on your hands, you should consider an insurance company that provides free consultation to shed some light on the matter and help you understand the terms and conditions before you make a purchase.
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