Most people understand life insurance. You buy it, and if you die while it’s in force, your family gets paid. Pretty simple. But what happens if you become disabled? Becoming disabled can have a huge effect on your family and your finances, limiting your ability to not only pay for day-to-day expenses, but save for retirement and your child’s college education.
Most life insurance policies will not pay you anything if you become disabled. (We’ll get into the policies that do later on.)
Your chances of becoming disabled at some point in your career is higher than you might think. Disabilities are more than just big workplace accidents. Most disabilities are actually diseases, like cancer, or chronic conditions, such as back or muscle pain. Approximately one in four twenty-year-olds will experience a disability before they retire, and the average thirty-five-year-old female office worker has a 24% chance of becoming disabled at some point in her career.
There’s a pretty easy way to cover disabilities with insurance — aptly named long-term disability (LTD) insurance. Long-term disability insurance can be thought of as an income replacement. Instead of paying out one big lump sum to your beneficiary like life insurance, long-term disability insurance pays you a percentage of your former salary every month you’re disabled.
If you’ve already got life insurance or you’ve decided to buy it, you may wonder how to budget a second type of insurance, especially when you consider other monthly bills like car insurance, a car payment, a mortgage, and student loans. Luckily, there are two ways that that you can get both life insurance coverage and long-term disability insurance without breaking the bank.
Get cheap life and LTD insurance
There’s one guaranteed way that you can get pretty cheap insurance coverage: buy young. Both life and LTD insurance premiums are based on your health, and typically, young people are healthier than older people. With LTD insurance, we’ve found that once you hit your early thirties, the cost of a new LTD policy goes up considerably.
However, there are still ways to save on both types of insurance. The easiest way to save money is to work with an independent agent. An independent agent can compare policies from multiple insurance companies, which is important because different insurance companies have different formulas for how they calculate premiums. Best Life Insurance Company, for example, might give someone with diabetes a better rate than Just OK Life Insurance.
Your independent life insurance or long-term disability insurance agent wants to get you the cheapest insurance possible, so be honest and forthright about your health upfront. That will help them find the best rates available quickly.
For more tips on how to save money, check out these articles:
Life insurance riders
If you can’t afford both a long-term disability policy and a life insurance policy, you may be able to get some disability coverage through your life insurance policy using riders. Insurance riders let you add additional coverage and rules to your policy. There are two life insurance riders that can help you if you become disabled:
Disability income rider. The disability income rider is very similar to a long-term disability policy. Basically, if you experience a disability and are unable to work, your life insurance company will provide you with a monthly stipend. These riders are very limited compared to a stand-alone LTD policy, however, we do believe they’re the next best thing if you can’t afford a stand-alone policy.
Disability waiver of premium. While this rider doesn’t pay you any money, it does let you stop paying your life insurance premiums while you’re disabled. Once your disability ends, you’ll have to go back to paying your premiums, but during the disability, it’s one less thing that you have to worry about paying.
Have more questions about either life insurance or long-term disability insurance? Check out life insurance guide or our long-term disability guide, both of which are full of articles and information about how these products work and how you can save money on them.