Regardless of what part of the banking field you’re in, you’ve put in the time, effort, and resources necessary to rise to the top of your profession, and reap the rewards of managing transactions and brokering high-value deals.

However, all of that can disappear in an instant when you choose not to take preemptive measures to protect your income.

The best way to avoid that is with disability insurance. Unfortunately, many bankers opt to go without it, and when something unpreventable happens, they come to regret it.

If you want to protect your way of life and ensure you can maintain your lifestyle even through the toughest rough patches, here’s a guide explaining what disability insurance for bankers is, how it works, and how you can purchase a policy in the most effective way.

What is Disability Insurance?

At its core, disability insurance is a two-part form of insurance designed to protect you financially if you become disabled and unable to work.

Contrary to what you may think, that doesn’t just mean the common types of disabilities you probably associate with disability insurance. Disability insurance can cover you in a very wide variety of situations, and even if you’re not likely to suffer from a dramatic accident, there are plenty of covered conditions that can affect anyone at any time.

Because of this, disability insurance for bankers isn’t just a good idea; it’s practically a necessity to ensure you don’t lose everything you’ve worked hard to build. If you are looking for a different type of insurance, you can get disability insurance for individuals.

How Does Disability Insurance Work?

Disability insurance is structured differently than most other types of insurance thanks to its two-part system. This makes some facets of getting coverage better, and it complicates things a bit in other areas.

However, the basic functions of the insurance type are the same between both parts.

Purchasing a Policy:

First, you’ll need to purchase a policy from a proper insurance company. Beyond some tips you’ll see later, you should know that you have two main options for this step. First, you can get a short-term disability insurance policy. This is a policy meant to provide financial stability when you suffer from something that can heal within a few months. Then, there’s long-term disability insurance, and that protects you for a much longer period of time due to the nature of the conditions it covers.

However, you don’t need to pick just one. You should aim to get each policy type to ensure you’re covered from pretty much anything that could go wrong. Don’t forget there is a waiting period for a disability insurance policy.

The Price of a Policy:

Regardless of which policy you purchase, you can expect to pay 1% to 3% of your annual gross income. That’s the standard price range of disability insurance across the industry ((1))

However, the way your exact premium costs are calculated is fairly complex.

First, like any type of insurance, the insurance provider will want to minimize their risks, or at least ensure that they’re being compensated better for any extra risks they accept. So, they will ask you a number of questions regarding your medical history, financial history, job-related risks you assume, and much more. This, along with the records proving your claims, will have a major effect on the exact rate you’re quoted. If you are more of a risk to the company than they’re willing to accept, expect to pay closer to the 3% end of the spectrum. However, if you are in good health, go to the doctor frequently, show financial responsibility, and don’t do anything that makes you a risk, you can get a lower rate.

You also have to consider add-on features. These are different clauses you can add to your policy to provide you with more coverage, premium paybacks, and more. They’re worth looking at, but keep in mind that they will raise your premium rates dramatically.

Finally, each of the two parts of disability insurance is sold separately. If you want both types of disability insurance for maximum coverage, you can pay as much as 6% of your gross annual income.

Making a Claim:

The time between purchasing a policy and making a claim doesn’t consist of anything more than paying your premiums each year.

The next big step happens when something unfortunate occurs, and you develop a disability. This is when you make a claim on your policy and attempt to receive your benefits.

Making a claim is the most stressful part of the insurance world because it consists of you proving you have a disability, providing all the information the insurance company needs, and then giving them ample time to comb through it in an attempt to de-legitimize the claim.

To start it, you need to get the proper paperwork from your insurer and start the application process. This is little more than filling out paperwork, but be careful how you answer questions. The way you answer the company’s questions might be used against you.

Then, you need to gather all the information the insurance company needs; even records they need but do not ask for. It’s a common tactic to prolong waiting periods by not getting all the required information. Remember this when applying for disability insurance.

At some point, you will also be required to have the doctor who diagnosed you with a disability fill out a questionnaire. This is simple enough, but you need to add another step; have the doctor write a personal letter to the insurance company explaining your disability, how it disables you, and why you can’t work with it. The questionnaire is often worded in a way designed to garner answers that work against you, and having a written letter can explain your disability in plain language that can’t be denied.

Once you have everything, it’s just a matter of waiting throughout the elimination period.

How Long is the Elimination Period (Waiting Period)?

The length of the waiting period varies depending on which type of policy you’re making a claim on and how well you handled the claim application process.

In general, you can expect a 14-day waiting period for short-term disability insurance claims and a 1-year waiting period for long-term disability claims ((2)).

However, it is possible to use a short-term policy while you wait for a long-term claim to be approved. Of course, you need to have both policies to do that.

Receiving Benefits:

This is the part everyone waits for and cares about the most: Receiving your benefits. After you have your claim approved, your benefits will start to be paid each month. How long you receive benefits and how much you get are both determined by the type of policy you have and the extent of your disability.

How Much Does Disability Insurance Pay?

Disability insurance benefits rarely pay out the full amount of what you made prior to your disability, but they do make substantial payments. For short-term disability, you will likely receive 66% of your monthly income prior to being disabled. For long-term disability, it can range from 50% to 80% depending on how disabled you are, how much you made, and the terms of your policy.

However, regardless of which policy type you’re claiming, most insurers put caps on the amount of income they’ll replace. Unless you’re very wealthy, this isn’t a problem. Most insurers go with a maximum payment of somewhere around $6000 per month, and that fits well into the average upper-middle class’s wages based on the payout percentage highlighted earlier ((3)).

How Long Do Benefits Last?

This is the main difference between the two policy types. Short-term disability only lasts for up to six months in most situations, but it can be increased to a full year if you’re waiting for a long-term claim to be approved. Long-term disability benefits can last until you recover from your long-term disability or reach retirement age; whichever comes first. This means that you can be on long-term disability insurance for as little as 15 months, or as long as 30 years depending on when the disability presented itself and whether or not you heal from it. However, at age 65, you’re expected to switch to your retirement plan ((4)).