When you hear “disability insurance,” what comes to mind? For some readers, that might be a benefit listed on your employee benefits portal you don’t know much about (well, that’s awkward). For others, it sounds like a worry just for construction workers working in a crane. And some may have personal experiences or through family members or friends who battled health challenges and are acutely aware of disability insurance’s value.
The idea behind disability insurance is straightforward. With some quick calculations, your future income is likely your most financially valuable asset. Let’s imagine a 30-year-old man earning $100,000 annually with 3% expected raises for the next 35 years. Over that career span, this employee has over $6 million ahead of him or herself in gross income. As corny as it sounds, nobody would walk around with a backpack stuffed with $6 million in cash without thinking carefully about its security. Or, would wear an engagement ring worth millions without a boatload of insurance (I hope).
Yet, when it comes to protecting our future earnings — the backbone of financial stability for most people — so many overlook the thought that illness or injury could disrupt their ability to earn an income. Planning for the possibility of disability is often the last thing on people’s minds; I find this to be even more so than about death and buying life insurance. Perhaps we’re naturally wired to avoid thoughts about scary and unpleasant things like personal health risks (which we would be witness to), especially if they seem unlikely or unpleasant. Or maybe it’s because life insurance has been the more traditionally discussed financial safeguard thanks to gentle nudges from loved ones saying, “Just buy it in case.” Disability insurance conversations, on the other hand, tend to be much rarer.
Over 70% of my insurance practice consists of selling disability insurance policies, which is quite unusual (most agents and brokers who sell life, disability and health insurance sell almost all life insurance). When I talk to my clients, I don’t dwell on hypothetical health scares or emotional stories. Instead, I focus on the practical aspects of the policy contract itself: what it covers, how it functions and the level of income it protects. My philosophy is that it’s best instead to just help guide people with sensible steps for financial responsibility, the same way they should stash away an emergency fund.
When you buy a disability insurance policy, it’s one of the most abstract products you’ll ever buy. You get a PDF or a paper contract as a trophy, but nothing more. You sign a contract with an insurance company with the expectation that they’ll be there to pay out if you need them someday. The terms vary, but the core promise is that if you become unable to do your job due to illness or injury, the insurer will pay you a set monthly benefit meant to replace some (ideally most) of your income for as long as you’re unable to work — up to a certain benefit period specified in the policy.
Both short-term and long-term disability insurance exist, but the disability insurance policies I work with are exclusively individual long-term disability policies. Individual long-term policies differ from group policies provided by employers because they belong to you personally and are portable, which means they travel with you from job to job. They generally have a benefit period that extends until you reach retirement age, 65 or 67. This kind of coverage makes sure that if you’re unable to work for an extended period due to a health challenge, your income replacement won’t end after a few months — it’ll instead be there to back you up for as long as you need within the terms of the policy.
I find some people conjure up images of a catastrophic accident as the event that could put them out of work. I once had a prospective client call me, frantically saying that he had a big ski trip coming up that weekend and he wanted to lock in a disability insurance policy to protect himself in case he got into a ski accident. He was surprised to learn from me that while he had an admirable instinct, disability insurance carriers report that 90% of long-term disability claims are illness-based, not injury-based. Regardless of the profession, chronic illness can affect anyone. I had to let him down gently. It also generally takes several weeks to be approved depending on someone’s medical history. We got to work on the application before he left for his trip and he joked that he’d stick to the bunny slopes.
At the end of the day, we pray that any money, time and energy we spend on insurance was all happily thrown out the window. But I feel strongly that proper insurance protection for my clients gives everyone a much greater dose of confidence about the possibilities of the unknown.
Jamie ‘Elisheva’ Kopelman is a disability, life, and health insurance broker with National Financial Network in Manhattan. Kopelman is passionate about making financial jargon simple and giving her clients quality insurance protection that fits any budget. She lives in NYC with her family and can be reached at [email protected] or by phone at 631.560.4701
