Your job as a broker is more of a mental stressor than it is a physical risk, and you most likely make a considerable income brokering the high-value deals of very well-off individuals and entities. This probably makes you consider something such as disability insurance a bit of an unnecessary expense you’re never going to use. After all, you’re not likely to get seriously injured by signing paperwork and negotiating, right?
Well, as it turns out, disability insurance should actually be one of your biggest priorities considering you make a lot of money, are constantly exposed to stress, and likely work for yourself.
If you’re uninsured and suffer a stress-induced stroke or heart attack, get into a wreck leaving work, or unfortunately develop cancer, you can lose everything you’ve worked for.
Obviously, that’s not something you want to happen, and you might understand how necessary disability insurance can be now, but how does it work?
Here’s an in-depth guide to disability insurance for brokers to help you understand disability insurance, choose the right policy, and rest easy knowing everything you’ve worked hard for is safe.
What is Disability Insurance for Brokers?
Disability insurance isn’t overly complicated. It’s simply an insurance policy that, in the event, you become disabled and can’t work, the insurance company will pay you monthly checks based on a sizeable percentage of your pre-disability income.
This is designed to help you maintain your lifestyle and stay financially independent even though you can no longer work.
How Much Does Disability Insurance for Brokers Cost?
Disability insurance fluctuates within a small percentage range depending on a number of factors.
First, the standard percentage range you should expect is between 1% and 3% of your annual gross income. How the exact figure is determined is a bit more complex.
When you approach an insurance company for disability insurance, the application process will include a lot of questions and the exchange of paperwork. The insurer will want to know your medical history, any risks you face at work, your financial history, any pre-existing conditions you suffer from, and a number of other things that can vary from company to company.
Those questions are used to determine how much of a risk you are to the company. The more of a risk you are, the higher your premium will be. If you pose barely any risk, you might get down to the 1% end of the cost range.
Beyond that, you will also need to consider whether you’re just purchasing a standard policy, or if you want to add a bunch of optional features to further flesh out your coverage. Each additional feature will add to the cost of your premiums.
Finally, you’ll learn more about disability insurance’s set up soon, but it is split into two types of policies:
- Short-term disability insurance
- Long-term disability insurance
Both of these insurance policies do the same things in different circumstances, but they’re sold separately. So, let’s say your insurer quotes you a 3% price for each of them. That’s not 3% of your annual gross income. It’s 6% ((1)) to have both.
How Much Does Disability Insurance Pay?
Disability insurance pays different amounts based on which policy type you get and the quality of the policy you purchase among other factors. It’s typically a broad range of possibilities. There is always a waiting period for a disability insurance policy.
For short-term disability insurance, you can expect to get 66% of your normal income each month. This doesn’t seem impressive, but keep in mind that short-term disability is meant for disabilities that only last a few months. It’s meant to sustain you until you get back to work ((2))
In comparison, long-term disability is meant for extremely serious situations where you’re highly unlikely to return to work in the foreseeable future, or maybe not even at all. As such, a lot more factors are taken into consideration, and you can get anywhere from 50% to 80% of your normal income every month ((3)).
No matter which policy you claim or how much you’re entitled to, you will almost always have to consider a payment cap. This limits how much of your money goes towards the percentage. So, if you make $20,000 per month, only $10,000 might count towards the percentage of $10,000 is the company’s payment cap.
How Long Does it Take to Get Benefits?
Before you can receive benefits of insurance, you have to make a claim just like with any other type of insurance. However, the amount of time it takes between making a claim and receiving your first month’s benefits differs dramatically depending on the type of policy that you are making a claim on.
Short-term disability tends to be the easiest to successfully claim, and it takes the least amount of time to start receiving benefits. This makes sense since the entire point is that it quickly provides you with short-term income replacement for disabilities that only stick around for a few months. Generally, you should only have to wait for 14 days to get approved or denied upon making a claim ((4)).
With long-term disability insurance claims, you’re looking at a much longer process. This is largely due to how long the insurance company might have to pay you. So, they want to put their due diligence into the process. On average, it can take up to a year to get approved for long-term disability benefits. Luckily, you don’t have to watch your finances slip away during that period if you think ahead. If you have a short-term disability policy, you can claim it and extend its benefits for up to a year while you wait for the long-term claim to be approved ((5)).
What to do When Claiming a Policy
Claiming a policy is a tricky situation. You have to be on your toes and make sure that you do everything right, or you might get denied despite legitimately deserving your benefits. This can be a hard pill to swallow when you’ve paid insurance premiums for years, and then when it’s time for them to hold up to their end of the bargain, they try to get out of it, but it’s how the insurance world works.
Before you make a claim, you can prep by making sure you’ve been receiving regular medical treatment and checkups throughout the years, get all your medical records ready, and ensure that your doctor has written their own letter to the insurance company detailing your disability and how it affects you. The insurance company will provide a questionnaire for them to fill out, but it’s important that you also get the letter. The questionnaire is worded in a way that can downplay your disability and cause a denial.
Once you’ve got all these things together, it’s time to make your claim ((6)).
Short-Term VS Long-Term Disability Insurance for Brokers
As you’ve seen throughout this guide, there are two forms of disability insurance you’ll want to look at. Beyond the differences in payouts and waiting periods that were listed earlier, there are major differences between what each policy type covers and how long they’re intended to cover you.
Here are breakdowns of each policy type.
Short-Term Disability Insurance for Brokers
Short-term disability lasts for 3 to 6 months under normal circumstances, but it is possible to extend it to as much as a full year if you are waiting for a long-term claim to be approved ((7)).
It also covers more basic disabilities that, while serious and requiring treatment, aren’t as dire and long-lasting as something such as cancer or kidney failure.
Here are some of the things you can expect to be covered by short-term disability insurance benefits.
Surgeries often require months of bed rest and physical therapy to heal from.
Pregnancies that are debilitating or suffering from complications.
This is in regards to complications that happen during the birthing process that requires time to heal.
Illnesses that may take far longer than usual to heal, such as Covid-19, various rare diseases, and other things that last months.
Serious sprains, broken bones, and some muscular issues that take months to heal fall into this category.
Mental health issues that require therapy or a period of medication adjustment, without requiring a permanent removal from work, are in this category.
Long-Term Disability Insurance for Brokers
Long-term disability is extremely similar to short-term disability, but beyond the paperwork and numbers involved, it’s very different. First, it can take anywhere from 6 months to 1 year to be approved, and this is a major reason why both policy types are recommended. This long waiting period is there to give the insurance company time to process your claim and see if there’s something they can use to deny it. However, Disability insurance lasts from the day you’re approved until the day you’re medically cleared or reach retirement age; whichever of those two comes first. For now, the retirement age is 65, but expect it to change as the government frequently adjusts it to match modern life expectancies and other factors ((8)).
Long-term disability also differs in what it covers. While short-term disabilities are things you’ll fully heal from within a few months, the long-term disability list consists of things that typically impact you for life, or at least a few years.
Cancer’s long-term impact and debilitating effects make it one of the biggest reasons for a long-term disability claim.
This includes heart attacks, heart failure, and other heart and bloodstream problems that are unlikely to go away.
This includes serious diseases such as COPD, a collapsed lung, chronic bronchitis, and various other breathing-related issues that can be debilitating or deadly.
Mental Health Issues:
In contrast to the short-term category, this is for mental health problems that are being treated but are still debilitating and will likely remain that way. The spectrum for what classifies as a disabling mental illness varies on a case-by-case basis.
Chronic Pain and Back Problems:
Chronic debilitating pain or back issues often caused by spinal injuries or degradation are covered by long-term disability insurance.
While short-term injuries are things such as broken legs or badly torn muscles, long-term injuries are much more severe such as paralysis, amputations, and other serious issues that don’t heal.
Which Disability Insurance is Best for Brokers?
Short-term disability and long-term disability both serve their own purposes. While long-term disability can potentially save you in far more serious situations, short-term disability can keep you from financial ruin over simple things such as breaking both your legs and being unable to walk.
They also work together nicely since short-term policies can be claimed far faster to allow for long-term policies to go through their waiting periods.
Neither policy type is technically better than the other, and both are recommended to ensure you’re fully protected.
How to Purchase Disability Insurance for Brokers
Purchasing disability insurance is incredibly complex. There are two types to look at, and each one is offered by a multitude of companies with multiple types of policies and drastically different policy requirements and guidelines.
Going through all of that on your own can be extremely stressful, and you might even make a mistake that costs you big time in the long run.
This is why it’s recommended to use a service such as Policy Solver.
Policy Solver is an insurance consulting firm that has built a massive network of insurance providers across all types of health-related insurance, and the Policy Solver team of insurance experts is ready to walk you through the purchasing process.
Don’t purchase disability insurance on your own. Contact Policy Solver for the best disability insurance for brokers possible.
1: Taken from Life Happens, 03/10/2022, https://lifehappens.org/disability-insurance-101/how-much-does-disability-insurance-cost/
2: Taken from ERS Texas, 03/10/2022, https://www.ers.texas.gov/Active-Employees/Optional-Add-on-Benefits/Texas-Income-Protection-Plan-(TIPP)/Short-term-Disability-Coverage
3: Taken from NOLO, 03/10/2022, https://www.nolo.com/legal-encyclopedia/how-much-does-long-term-disability-pay.html
4: Taken from Period Pro Help, 03/10/2022, https://www.periodprohelp.com/7-day-waiting-period-for-short-term-disability/
5: Taken from MCMHA, 03/10/2022, https://www.mcmha.org/best-waiting-period-buy-disability-insurance/
6: Taken from Dawson Rosenthal Trial Attorneys, 03/10/2022, https://www.dawsonandrosenthal.com/san-diego/disability-denials-and-delays/
7: Taken from Exactly How Long, 03/10/2022, https://exactlyhowlong.com/how-long-is-short-term-disability-and-why/
8: Taken from Brian So Insurance, 03/10/2022, https://briansoinsurance.com/how-long-does-long-term-disability-insurance-last/