Working past the traditional retirement age of 65 is a hot topic these days.
People can expect to live longer and enjoy better health than their ancestors, so working into one’s 70s carries a certain appeal: the companionship and accomplishments of work, keeping the mind active, while barring the door against the proverbial wolves.
Many people simply cannot afford to retire at the customary age, as the golden years don’t come cheap. But what happens if accident or ill health – always a possibility, no matter the statistical trend – prevents them from working? Long-term disability insurance is a practical necessity and not simply for senior citizens, as misfortune can arise at any age.
The Bureau of Labor Statistics says that around 60% of professionals are protected by long-term disability plans provided by their employers. Freelancers are on their own. These people, who make up an increasing portion of the professional workforce, are often flummoxed when confronted by the need for disability coverage. It’s a complex market: where can they even begin?
The need is clear enough: around 30% of the workforce will need disability coverage for six months or more at some point in their working lives. Some policies cover permanent disability as well, but others do not. The choice calls for careful thought and planning, with affordability to the fore. As usual in financial security matters, though, something is better than nothing.
The plans are often expensive at that: according to a New York Times report, you can expect to spend 3.5% of your annual income on coverage. That pill can be rather hard to swallow – permanent disability is fortunately a long shot and most will never need even shorter-term coverage – but the sleep-soundly factor suggests the cost should be borne, if possible.
If you’ve socked away enough savings to cover emergencies, a more economical policy may suffice. For example, if you had $50,000 in savings or liquid investments and monthly expenses of $3,000, you’d have enough to cover a six-month recovery period without badly cracking your nest egg. In this case, you could buy disability coverage with a six-month waiting period. This would limit the premiums, while assuring coverage in the event of any dire circumstances.
Disability policies are readily available with waiting periods of 30, 60 and 90 days, as well as six-month and one-year periods for the optimistic, well provided or income-restricted customer. The average busy – read solvent – freelancer can likely afford some coverage without breaking the bank.
If you file a claim, the insurer will ask your doctors if you’re capable of performing your job, or potentially, other types of work. Independent workers who finely specialize should probably opt for “own occupation” coverage. Without it, the insurer could insist that you find a job beyond the bounds of your normal avocation. If you’re a financial writer or editor, say, and you break an arm, own-occupation coverage would pay out even if you could feasibly flip burgers – a one-handed experience you may not want.
This option is best for highly successful freelancers, because it’s more expensive than standard coverage. Lower earners might not mind being cajoled temporarily onto a different career path. This is particularly true for younger freelancers, who may not be earning enough yet to justify the coverage cost – and for them, the barista routine might not sound so odious. Choosing coverage often comes down to where you stand at the moment – but again, when the arrows fly, a small shield is assuredly better than none.
For more information, please read:
What Freelancers Should Consider When Shopping For Long-Term Disability Insurance | Forbes