How many insurance policies do you own? One? Two? Ten? Perhaps you don’t buy any insurance because you’re skeptical. With so many insurance companies offering policies for everything imaginable, it’s easy to understand why some people would be skeptical about buying another insurance policy.
In addition to the staples like life insurance, health insurance, and car insurance, you can get insurance for just about anything. For example, you can insure your jewelry, your mortgage payments, and your collectibles. Essentially, anything of value can be insured.
While many people have a variety of insurance policies, if you’re skeptical, you probably only have what is required by law, like car insurance. If you have a family, you might have life insurance, and that’s where you draw the line.
If you’re healthy, you might choose to pay out of pocket for healthcare rather than pay a high premium each month. This does make sense. However, even if you’re healthy, there’s one insurance policy you may want to consider: long term disability insurance (LTDI).
What is long term disability insurance?
Long term disability insurance is a policy that will help you pay your bills if you are seriously injured or fall seriously ill and can’t work. For an in-depth explanation, visit this long term disability insurance guide.
In summary, there are several things you need to know about long term disability insurance.
Illness and injury can be unpredictable
You can’t know ahead of time if or when you’ll experience an accident or a random serious illness. Even healthy people can become sick with diseases they didn’t see coming. It’s entirely possible, especially if you work around toxic substances or work in an industry considered dangerous, like construction.
Self-employed contractors need a private long term disability policy
When you’re self-employed and working as a contractor, you need to have your own private long term disability insurance policy. Without personal coverage, if you get injured or fall ill for any reason and you can’t work, you’ll get stuck with huge medical bills while your household bills pile up. Having a policy will help you recover lost income when you’re disabled over a prolonged period of time.
Employees are generally covered by workers’ compensation
If you’re an employee working in a dangerous trade or profession, you’ll most likely be covered by your employer’s workers’ compensation insurance policy. Most are required to carry a policy by law.
The entire workers’ compensation system is designed as a fault-free system. That means any worker who sustains an injury in any manner is eligible to file a claim. For example, OSHA reported that in 2019, one in five workplace deaths occurred in construction and thousands were injured on the job. All of those injured employees were entitled to file a workers’ comp claim regardless of fault. It doesn’t matter if they contributed to or even fully caused their own injury.
The entire workers’ comp system was created to limit the number of lawsuits workers file against their employers by providing financial compensation on a no-fault basis. With few exceptions, injured employees are required to file a workers’ compensation claim rather than filing a lawsuit against their employer. Lawsuits are a last resort scenario.
When an employer either doesn’t have workers’ compensation insurance or isn’t required to carry a policy, an injured worker has no choice but to sue to recover compensation for their medical bills.
That’s why you need a private long term disability insurance policy if you’re not covered as an employee. You can try to sue your employer, but even if you win, what if they don’t have the money to pay your judgment? What if they choose not to pay? How much time and energy are you willing to expend chasing them down for compensation?
Employer-sponsored disability insurance policies aren’t enough
Most employers don’t offer long term benefits to employees. According to data published by The Balance, only 34% of private industry workers had access to long term disability insurance plans in 2018. That means even if the remaining 66% wanted a policy, they wouldn’t be able to get it through their employer.
Many employers will provide short term disability insurance to employees for as low as a few dollars per paycheck. These policies look good on paper – and they’re cheap – but they don’t provide adequate coverage for serious injuries that last more than a few months. Unfortunately, even seemingly minor injuries can prevent a person from working for six months to a year, depending on their job.
Short term benefits usually last between 3 to 6 months and cover around 80% of your gross salary. However, if the coverage doesn’t last long enough, you’re out of luck.
If you can get STDI either for free or cheaply from your employer, it’s worth having. However, you don’t want to rely solely on STDI. Technically, you’d be better off having both SSDI and LTDI because they complement each other well. They’re actually designed to work together.
Depending on your policy, you’ll need to wait anywhere from 90 to 360 days before your long term benefits will kick in. However, your short term benefits will kick in sooner and carry you through the elimination period until your long term benefits kick in. Once your long term benefits kick in, your coverage will last for years.
Do you work in a risky industry? You need long term disability insurance
If your job puts you at risk for injury or illness, you need LTDI. If serious injury is a common experience in your profession, get a good policy that will cover you for as long as possible. Even if your employer has a workers’ compensation policy, get LTDI to make sure you’re fully covered.
If you sit down at a desk all day typing on the computer, you probably don’t need long term disability insurance as much as someone who works in construction. However, there are injuries you can sustain that have long-lasting effects. For example, carpal tunnel can make it painful and impossible to type. If you can’t type, you can’t do your job. In that situation, you’d be grateful for LTDI.
You can’t know for sure what the future holds, and that’s why insurance exists. However, the higher your risk for accidents, the more urgent it is to get the coverage needed to stay financially stable after an unforeseen injury.