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Life and Health


By January 1, 2012No Comments

Self-employed individuals who work from home usually don’t think about purchasing Disability insurance. However, the few individuals who do consider it receive positive feedback about the idea from an insurance agent. Those who have researched this type of coverage usually find that policies are expensive. In addition to this, not all Disability insurance companies are willing to work with self-employed individuals. Many policies aren’t enough to replace regular income. There are a few important things to know in order to get the coverage needed at a good price.

How Much Insurance Is Needed? The purpose of Disability insurance is to replace regular income for a long period of time. The disability might last a few years. However, disability income might be needed until retirement age. Although disability policies for self-employed individuals rarely replace gross income, they can replace a considerable portion of it. To get a better idea of how much to aim for in a policy, consider how much is paid each year in taxes. That amount should be deducted from gross revenue and expenses. It’s best to find a policy that allows this amount of compensation. If there are licenses or other business expenses that must be paid to keep current in the event of a disability, it’s best to add a Business Operating Expenses policy to the LTD coverage. BOE policies are limited, so it’s important to speak with an agent to understand exactly what they cover.

How Much Coverage Costs. Disability coverage can be costly. In most cases, a good policy’s monthly premium is slightly more than 10% of gross monthly income. Keep in mind that smaller premiums mean less coverage. There are ways to save a little money without skimping on coverage. First, consider buying a policy for a set number of years instead of the full term between current and retirement age. Another way to lower costs is to extend the benefit waiting period. Settling for a smaller payout is another option. The most optimal option is to buy into a group policy. Individuals who belong to a professional organization should contact an agent or the organization to see if there are group policies offered. Agents might also know of other resources available to some individuals.

How Qualification Is Determined. Since a LTD policy replaces income, it’s important to prove income. To do this, copies of tax returns from the past five years are often required. Insurance agents might also make a home visit to analyze a work area. Their goal is to ensure that individuals are truly earning a living the way they say they are. If agents suspect that work performed at home is part-time or irregular, there may be issues with qualification. Obtaining the proper licenses for the type of work chosen is very beneficial. For example, an accountant should have the proper licenses for practicing accounting and running a business. Keeping the working area properly separated from the living area of the home also helps. Freelance workers and other independent workers who don’t have licenses face the biggest qualification challenges. Written contracts, proof of a steady income and tax returns are the best tools for such individuals to prove qualification.

The Most Important Policy Details. Be sure to ask an agent if the policy replaces income from all types of work or a only current profession. Some policies are set up to encourage workers who lose the ability to do one task to do another similar task. However, some policies pay disability benefits to a worker who can’t do their specific job anymore even if they qualify for a different type of job. This usually becomes an issue if the alternate job choice pays significantly less than the current position. If the disability policy pays more than an alternate form of work would, it’s best to keep the policy. Most policies have a waiting period between 60 and 90 days. Some waiting periods restart if an insured individual attempts to work during that time. Be sure to understand the terms of the policy thoroughly. Contact one of our agents with any questions.