The sudden and permanent loss of your income due to accident, injury, or illness, can be a devastating blow upon an already highly distressing time. Total and permanent disability insurance (or long-term disability) is the coverage you can take out to replace your income should you become permanently unable to work.
In this guide, we’ll break it down – what it covers, why it’s important and how to get it.
What is Total and Permanent Disability Insurance?
Total and permanent disability insurance is insurance that covers all or part of your income should you become permanently disabled.
Workers’ compensation is a system of benefits that protect employees who sustain illness or injury on the job. Sometimes it is necessary to engage with a personal injury lawyer to ensure that you receive all appropriate benefits owing to you through this scheme.
Sometimes, work-based benefit packages incorporate total and permanent total disability coverage for you, otherwise, you can purchase it yourself through an insurance company of your choice. You can also supplement your workplace policy with your own coverage.
What Does it Cover?
This insurance is designed to cover disabilities sustained that are so severe that you are permanently unable to return to work – or at least, not to the job you were able to undertake prior to the disability.
It is designed to replace your usual income, or part thereof. In other words, the insurance makes regular payments to you in replacement of your usual salary, or more commonly, a percentage of it, such as 75%.
Here are some examples of the need to claim:
- Permanent paralysis resulting from an accident occurring outside of work
- Permanent chronic disease or autoimmune illness that prevents you from working
- The onset of a permanent mental illness condition that symptomatically prevents you from working – like schizophrenia.
It is the permanence of a debilitating condition that characterizes eligibility for a total and permanent disability insurance claim – it must be a condition that you are not expected to recover from fully.
Each claim is individually assessed as the complexity of disability-related outcomes is significant – not all illnesses and disabilities result in an inability to work. For some, they must only reduce hours or change their vocation, in which case the insurance company may make part-payment to supplement any lost income.
How Much Does it Cost?
Like most insurances, the cost of premiums depends upon your age, health, and the amount of salary loss you are insuring against. Ultimately, the higher your risk of disability and the higher your salary, the greater your insurance premium.
Again, like any insurance, it’s a gamble – this insurance can be costly but must be weighed up against the realities of what suddenly and permanently losing your income could mean to you and your family.
Do I Need Permanent Disability Insurance?
Life is full of surprises and managing that uncertainty can be tricky – there is no way of knowing whether you will ever need to rely on insurance coverage like this and so, it’s really up to you to weigh up your overall situation to decide whether the peace of mind that this coverage affords you makes the cost of it worthwhile.
Here are some questions you can ask to help determine your needs:
- Do you have children or other dependents who rely on your income?
- Do you service significant debts such as mortgages with your income?
- What is your current age, health status and family health history
Typically, large financial dependencies upon salary – like home mortgages and children’s college tuition – play a big role in determining the need for any income-based insurance, and of course, family history of disease or disability can give you cause to consider additional preparedness.
What About My Student Loans?
Suffering a total and permanent disability may result in your federal student loan balance being waved. Whilst this is not directly related to holding your own insurance, this information can assist you in determining the level of coverage you need in addition to this assistance.
Removal of your federal student loans requires a separate application that you must lodge through the U.S. Department of Education. This discharge may also include relief from the following:
- William D. Ford Federal Direct Loan
- Federal Family Education Loan (FFEL)
- Federal Perkins Loan
- Teacher Education Assistance for College and Higher Education (TEACH) Grant service obligation
You may be eligible if:
- A physician confirms that your capacity to carry out ‘substantial gainful activity’ due to an illness or injury has diminished and/or will remain so for at least 60 months
- The Department of Veterans Affairs determines that you are unable to work due to a disability sustained during Military Service
- The Social Security Administration declares you unfit for ‘substantial gainful activity’ – thus also qualifying you for Social Security disability insurance and its associated benefits
Eligibility is determined via an application lodged through Nelnet, the government’s TPD servicer, which can be completed online. Once received, Nelnet requests all applicable loan providers to suspend their collection for 120 days whilst your application is considered.
Not only would it bring about the loss of one income, coping with trauma or loss can affect the earning capacity of more than one family member. In addition, unforeseen expenses such as funeral costs, counseling, or property adaptations can really stack up at a time when stress levels are already at an all-time high.
It may also be worth considering our national statistics – according to the Institute on Disability: US Census Bureau, people living with disabilities are twice as likely to live in poverty than those without.
Are There Any Discounts Available on This Type of Insurance?
Not as such, but there are a few ways that you can keep the premium costs somewhat lower:
- Insure only a proportion of your salary – even covering yourself for 50% of your loss of earnings can still go a long way to providing you with vital support in difficult times, whilst also lessening the financial burden of such high premiums in the meantime.
- Purchase insurance through work – not ideal if you change jobs, but otherwise, this can be a cheaper option worth investigating.
- Bundle it with your life insurance – you may be eligible for discounts if you are also in the market for life insurance coverage.
How Do I Get Coverage For Total And Permanent Disability Insurance?
Buying total and permanent disability coverage through work is typically very simple and just a matter of making the inquiry and signing up – however, the coverage may not be as thorough as you would like.
To be sure you are getting the coverage you need, it is best to consult with an expert independent insurance agent.
An insurance agent can help walk you through the application process and assist you with organizing any medical examinations that may be required, as well as help you to ascertain the level of coverage you need.
Arranging total and permanent disability insurance can feel like a heavy task, but it can be made much easier with an insurance agent’s help and guidance – plus, they are there for you if you ever needed to make a claim.
Choosing insurances, particularly health-related ones, is a very personal decision and only you know what is best for you and your family.