There’s not a lot of time for mechanics to think about disability insurance, right?
If you are a mechanic, your work is hands-on. And, busy! You enjoy the challenge of fixing and solving problems. Moreover, you particularly enjoy how you help your customers get back to their everyday life! You rely on your technical skills as well as your physical ability to get the job done.
What if you could no longer do that job? Have you ever thought about what would happen if you became sick, ill, injured, and disabled? How would bills be paid if you could not work? The lifestyle you worked so hard for and your future plans could quickly be affected.
I know you are busy. However, it’s time to start thinking about disability insurance.
- Why You Need Disability Insurance?
- The Types Of Disability Insurance
- Your Occupation Matters
- The Makings Of A Strong Policy For Mechanics
- Protect Your Business & Other Disability Insurance Options
- Premium Cost Of Disability Insurance
- Now You Know Mechanics Can Obtain Disability Insurance
Let’s start off by discussing why mechanics need disability insurance.
Why Mechanics Need Disability Insurance?
It’s simple, really.
Disability insurance helps pay your bills if you can’t work due to an illness or injury. Anything illness or injury-related that prevents you from doing your job as a mechanic is a disability. If you will struggle to pay the bills (your mortgage, groceries, healthcare, etc.) upon a disability, you probably need disability insurance.
Here’s the real reason you need disability insurance. I’ll present this in a different way. Your clients are very important, right? However, there is also a group of people who are more important. Who can be more important than my customers, you think. They pay the bills.
True. They do, but they don’t love you as your family loves you. By far, if you have a family, your spouse and children rely on you more than you think. They love you more than anything. You wouldn’t want anything to happen to you that affects them, right?
There are tough questions that need answering. Would you and your family be able to continue your standard of living without your income? If not, what changes would need to be made? Would your spouse have to work or work more? Would you need to sell your home to make ends meet? Who could be flexible with the children? Would you have the money to hire someone to take care of the kids? The tough questions can go on and on.
Disability is a destroyer of dreams. Your future and family dreams could be destroyed. They don’t have to, though. With disability insurance, you have peace of mind knowing that you have a plan – and income – in place should the unexpected happen.
Yes, But A Disability Won’t Happen To Me
You think it won’t. However, the probability of having a long-term disability is anywhere between 1 in 3 and 1 in 4 workers. Contrast this to unexpected death, say from a motor vehicle accident, which is 1 in 114. Even dying from cancer has better odds: 1 in 7.
But, John, I’m not going to get hurt or be in a wheelchair, you say. Wow! I respond. If you know that, then you should not be a mechanic. You need to play the lottery if you see your future!
In all seriousness, when we think of disability, we think of someone bound in a wheelchair, right? Not true and far from it. According to the Council For Disability Awareness, 90% of disabilities are from illnesses (like cancer) rather than from accidents. That means an illness or condition, such as cancer or a heart condition, has a higher probability of disabling you than dropping a brake drum on your foot.
Ok, John, but I have workers’ compensation. I don’t need to worry about money. That’s great, I say. Did you know that 5% of disabling conditions are work-related, leaving the other 95% not covered by workers’ compensation? That makes sense, since 90% of disabilities are from illnesses.
Again, what is your plan if you can’t work?
The Types Of Disability Insurance For Mechanics
There are really 3 types of disability insurance available for mechanics. We will discuss alternative insurances later in the article.
The 3 disability insurances include:
- short-term disability insurance
- long-term disability insurance
- accident-only disability insurance
Many people ask us about the difference between short-term disability insurance and long-term disability insurance. Here’s the difference.
Short-term is really designed for a disability of a short time period. Let’s say you break your hand. Well, it’ll be hard to work with a broken hand, right? So, that is a disability – you can’t do your job as a mechanic. How long does a broken hand heal? Two to 3 weeks? Once you’ve met the waiting period, you’ll be eligible for benefits and receive some disability benefits.
Long-term becomes the life-saver on those disabilities that last longer than 3 months. Cancer… a catastrophic injury…ALS…Diabetes…you name it. Most families can get by financially when one member has a short-term disability. Sure, it might be tough, but families can get by. It’s a long-term disability that can financially ruin families.
Both insurances generally use the own-occupation definition of disability. (More on that in a minute.)
Step On The Brakes For Short-Term Disability Insurance
You might say to yourself, “Short-term disability insurance is the way to go!”
We say, “Not so fast…”
Short-term disability insurance can be incredibly expensive for mechanics. Look at the snapshot here. We are talking over $154/month for 3 month benefit period!
This is the general reason why we believe short-term disability insurance is a waste of money.
You should save that money and beef up your long-term disability insurance, which helps much more if you can’t work.
Finally, there is accident-only disability insurance. Think of this as a “last resort” disability insurance. It will only pay a benefit if you are disabled due to an accident. The better carriers offer coverage for both on and off-the-job injuries. Usually, there are no health questions. Most accident-only disability insurance is affordable. The reason is that most disabilities are not caused by accidents.
In this article, we focus on long-term disability insurance. However, you can contact us for any questions about short-term disability or accident-only disability insurance.
Your Occupation Matters
So, all the disability insurance carriers classify occupations. In general, the carriers classify from 1 or A to a 5 or 6. An occupation with a class 6 has the lowest disability risk due to occupation and class 1 has the highest. All things being equal, you’ll pay a higher premium if you are a class 1.
Disability insurance carriers usually classify mechanics as a 2. In some cases, a class 3 may be available.
So, what does this have to do with mechanics?
Well, you do have the potential for a higher on-the-job disability compared to, say, an office manager. Carriers underwrite this by assigning your occupation a classification number.
While there is general alignment among the disability insurance carriers, some carriers elevate your classification higher. All things being equal, carriers with a higher occupation classification save you money with lower monthly premiums.
The Makings of A Good Disability Insurance Policy For Mechanics
Our goal when designing disability insurance plans for mechanics is the combination of value and premium. In our opinion, there are certain “non-negotiable” provisions with disability insurance. The first is the own-occupation definition. Luckily, many carriers make this definition of disability available for the mechanic occupation.
The own-occupation definition means that the carriers pay a disability benefit if you can’t perform your own occupation as a mechanic. It pays even if your disability doesn’t prevent you from working in another job, say as a security guard.
Another “non-negotiable” feature is partial disability benefits. You’ll want this. All this means is that the carriers pay you a partial benefit if you can work, but just not full-time. Many carriers offer this, but they have a stringent definition. We work with carriers that offer an easier definition for mechanics.
Of course, you’ll want to insure the most income you can. If you are an employee, most carriers will insure 60% of your salary. For example, if you have a gross monthly salary of $5,000, you can cover up to $3,000 (60%).
However, if you are a self-employed mechanic, some carriers will insure 80% or more of your net income.
What is net income? It is your gross business receipts less business expenses. Let’s say you earned gross $100,000, but your mechanic business expenses are $40,000. Your net income is $60,000. This is the insurable number. Why?
Because this is the number you’ll pay your house mortgage on, your utilities, entertainment, etc.
But, John, you say. I pay rent and have other expenses. If I’m disabled, I need to pay that, too.
No worries. We discuss another type of disability insurance that covers that.
Disability Insurance Policy Basics For Mechanics
There are several definitions and provisions you’ll need to understand about disability insurance to make an informed decision.
There is an elimination period, or waiting period, which is like a deductible. It is the length of time that elapses before disability benefits begin. For example, if you select a 90 day elimination period and are disabled, you’ll be eligible for disability benefits on the 91st day. However, typically with carriers, you won’t get paid until day 120 or so. This means you need to have adequate savings to carry you and your family until benefits begin.
For long-term disability insurance, you can go as low as 30 days for a waiting period.
Disability benefits can be paid for as long as 5 years and with some carriers to age 67. The average disability lasts around 30 months. Therefore, a 5-year benefit plan should be OK.
The benefits of an individual policy are income tax-free. Note that benefits from group disability insurance plans (i.e. through your employer, if offered) are typically taxable.
Optional Disability Insurance Riders
You can add optional riders at an additional cost to your policy to best fit your needs and budget. Some popular rider options for real estate agents and realtors include:
Return of Premium Rider: Provides disability insurance coverage if you need it, your money back if you don’t.
Guaranteed Insurability Option Rider: Allows you to obtain the coverage you need now with the option to purchase additional coverage in the future without evidence of good health.
Retroactive Injury Benefit Rider: Pays benefits from the date of disability due to injury if a disability occurs within 30 days of the injury and continues through the elimination period.
Activities of Daily Living Rider: This rider pays an additional benefit if you can’t perform two or more of the activities of daily living. Additionally, it will pay if you are cognitively impaired.
Protect Your Business If You Are A Business Owner
If you own your business or are self-employed, you have an advantage. You can enroll in a policy that will pay your business expenses upon a disability.
The policy is called a business overhead expense policy. Premiums are tax deductible. If structured properly, benefits are tax-free as well. This type of policy will ensure your business remains solvent during your inability to work from a disability. You can then pay your business expenses and keep your business open.
This is an additional reason why mechanics need disability insurance. What would you do if you lose your business upon a disability?
Carriers who offer this type of insurance typically offer a discount on an individual disability insurance policy. Additionally, we only work with carriers that offer an occupation upgrade as well.
Remember we discussed short-term disability insurance and the expense? These alternative insurances help. If disability insurance is out-of-reach or you are uninsurable, there are other types of insurance that act like disability insurance (but not). They are affordable, too. Here they are:
hospital indemnity insurance – the ones we like pay a lump sum benefit for hospital admission or outpatient surgery. What can you do with $6,000 in the short-term? I bet a lot.
critical illness insurance – will pay a lump sum benefit if you are diagnosed with cancer, heart disease, or some other covered condition. These plans are more robust and can be a viable option for mechanics.
accident insurance – we touched on accident insurance earlier. There are a couple of different types, all affordable. When you think about the occupational risk of mechanics, an accident insurance policy is an affordable way to protect yourself.
Premium Cost Of Disability Insurance
Of course, how much you spend is important. The good news is disability insurance is easily customizable to your needs and budget. Depending on your health and riders, the premiums could run anywhere from $1.00/day to $3.00/day, or more. Do you think that it is expensive? I bet you buy coffee almost everyday or your lunch. What is more important? Insuring your income or buying a cup of coffee? There are many ways to afford disability insurance.
We at My Family Life Insurance try to keep our client’s premiums below $100 per month. Nearly all of the time, we accomplish that. You can easily customize a comprehensive policy for less than $100. Honestly, I think we might be the only agency that aims for that. The reason is we know you have other things to spend and save (like your retirement).
However, there are some characteristics outside one’s control. Remember, that disability insurance is based on 4 factors:
- your age
- income insured
You can’t change your age, and you can’t necessarily change your occupation. You can change your health…to a point. If you have type 2 diabetes, for instance, nearly all carriers will increase your premiums to compensate for the increased disability risk. Remember, we discuss that most disabilities are from disease and illness rather than accidents.
Nevertheless, we can structure a plan that protects you and your family, while meeting your needs and budget.
Now You Know Mechanics Need Disability Insurance.
We hope now you have a solid idea of why mechanics need disability insurance. Confused? Don’t feel that way. We’re here to help educate you and protect your income and future. Don’t know where to start? Use this disability insurance needs analysis worksheet. Follow the instructions; it is rather easy to fill out (we at My Family Life Insurance try to make understanding insurance easy).
Next, feel free to reach out to us for our assistance or a quote. We only work for you, your family, and your best interests only. We have helped many mechanics secure the right disability insurance for their specific situation, giving them and their families peace of mind.