How Independent Contractors Can Use Long Term Disability Insurance

Independent contractors are like workers in most other professions: They can become disabled and lose the opportunity to keep earning a living. In fact, the chances that you’ll become disabled have actually been studied and estimated by the Social Security Administration. They inform us that it is far more common that one may initially guess. For example, a 20-year-old person has a nearly 27% chance of becoming disabled for at least 12 months before they reach retirement age.

It is highly prudent, therefore, to mitigate against the possibility of a disabling event, especially one that can have such an adverse effect on your very livelihood. Fortunately, there are a few steps you can take.

Independent Contractors: What To Do Before You Become Disabled

There are two principal ways to protect against a disabling loss. One is to make basic improvements in your lifestyle that reduce your odds of becoming disabled. For example, many independent contractors drive quite a bit in congested urban areas, often at peak times of travel. By beginning your travel in enough time so that you don’t have to rush, and by maintaining attention to the road, your odds of having a major accident will be lessened.

Even so, random accidents account for less than 10% of disability cases. Arthritis, heart disease, cancer and mental health problems are some of the most common causes of disability. Therefore, the second step to take is to purchase disability insurance. If you become unable to work because of a covered disability, much of your working income will be replaced, generally on a monthly basis for a covered period of time. You will not have to tap into your hard-earned savings because you have insured yourself against this serious personal financial catastrophe.

Group vs Individual Long Term Disability Insurance

There are generally two ways to obtain long-term disability insurance: buy through a plan sponsored by your company or purchase individual coverage. The difference between the two are significant. According to Policy Genius, a private long-term disability insurance can cost upwards of $100 per month for a 30-year-old man taking out a policy for $5,000 per month in coverage. The costs of a group coverage are sometimes up to 30-50% lower. Due to a lack of underwriting, group policies are also more favorable as they provide guaranteed coverage at a set price based on age.

Follow These Steps if You Become Disabled

Man holding disability claim form for insurance.

A basic summary of what steps to take if you have disability coverage and need to file a claim has been provided by Policygenius, and is summarized below:

If you do become disabled, file a claim with your insurance company as soon as possible. Locate your insurance policy and review the coverage that you are entitled to. The policy will have specific instructions on how to file a claim.

In most cases you will need to provide several types of information to the insurance agency. Typically, this includes (1) a statement that describes the details and extent of the disabling circumstances, (2) a statement from your employer (if you are not self-employed), and (3) a physician’s statement that documents for the insurance company the exact nature of the disability.

It may take some time before your claim is processed.  Most disability insurance policies have an elimination period, often 90 days after the day you become disabled, after which payouts commence. Also, review your medical and work records again: The insurance company may contact you for more information. Once approved, your payments will last as long as the coverage period of your insurance stipulates, or until you can begin working again.

Keep in mind that disability claims are sometimes rejected. Most often, this is due to insufficient medical evidence or that the situation is not part of the policy’s definition of a disability. If your claim is rejected, but you believe you are entitled to payments, promptly file an appeal with the insurance company.

Do You Need Disability Insurance?

Of course, much of the foregoing is not applicable if you don’t already have disability insurance. If you have none or are under covered, Rosenbaum Financial is well known as the top firm for disability and other insurances for real estate agents and other independent contractors.

Our 1099 Advantage Plan provides long- and short-term disability insurance as well as life insurance, accident coverage, and other benefits. The plan provides group benefits to independent contractors – regardless of their medical history or a financial review. The cost to the company is minimal and the monthly cost to individuals is often 30-50% less than what they would pay on their own. Contact us today to learn more.

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