As a massage therapist, your work is hands on…literally. You truly make a difference in your client’s lives. Moreover, you particularly enjoy how you help your customers feel better, de-stress, or recover from chronic pain! You rely on your skilled knowledge as well as your physical ability to get the job done. What if you could no longer do that job? Have you ever thought what would happen if you became sick, ill, injured, and disabled? How would you pay the bills if you could not work? Disability quickly affects your future plans and the lifestyle you worked so hard for. In this article, we discuss disability insurance and the best disability insurance for massage therapists.
More Important People Rely On You
Your clients are very important. However, there is a group of people who are more important. Who can be more important than my customers, you think. They pay my income.
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.
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 known as the 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 It 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 massage therapist. If you can see your future, you need to play the lottery! You won’t have to worry about income at all!
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) than from accidents. That means an illness or condition, such as cancer or a heart condition, has a higher probability of disabling you than a skiing accident.
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 income plan if you can’t work?
The Importance of Disability Insurance For Massage Therapists
Hopefully, we have made a great case showing that massage therapists need disability insurance. You already have some through work? Great! While that is good, most likely it is not enough. Why?
Generally speaking, you pay for your group (i.e., work) disability insurance through pre-tax deductions from your paycheck. While that seems good, as it lowers your income for income tax purposes, it is not good if you need to take a benefit. The benefit ends up being taxable income. What does this mean? By every April 15th each year, you need to report your disability benefit and pay taxes on it, which can put additional strain on your finances. This makes, in effect, your net-disability pay being about 30-40% of your gross salary. Can you and your family live off that?
The good news is that incrementally, you may not need much more. How much you need depends on your income and needs. Most importantly, you will have peace of mind. In the case of your disability, you will receive a benefit that helps maintain your standard of living, cover costs such as your mortgage, utilities, and groceries, and keep your family dreams and future alive.
Disability Insurance Policy Basics
While every carrier is different, here are the important policy basics for massage therapists.
You generally can cover up to 70% of your gross salary. Every carrier is different, though. Some have 60% coverage maximums. For example, if you have a gross monthly salary of $5,000, you can cover up to $3,500 (70%).
Obviously, your health matters for underwriting. What you may not know is that your occupation matters, too. Most carriers will not cover high-risk professions for the simple reason of an increased probability of disability. Carriers classify the risk from a scale of 1 to 5 or B to 5A. The lower the number or letter, the riskier the occupation, and the higher the premium, all things being equal. Massage therapists are typically classified as a 3 or 3A.
There is an elimination or waiting period, which is like a deductible. It is the length of time that elapses before disability benefits begin. For example, a 90 day elimination period means your benefit period will begin after 90 days of disability. This means you need to have adequate savings to carry you and your family until benefits begin.
The maximum benefit period is 10 years.
The Definition Matters…
The definition of disability matters. You generally want “true own occupation” coverage followed by a form of modified own occupation. What is “true own occupation”? Simply, it means you can continue to work in another occupation while receiving disability benefits for your own occupation as a massage therapist. So, if you can’t use your hands, but you can greet people at Walmart, you will receive disability benefits in addition to your earnings as a Walmart greeter.
Modified own occupation is a bit different. You will receive a disability benefit based on your education and experience as a massage therapist. However, you can’t work in another job. So, if you worked as a Walmart greeter, you won’t receive disability benefits under the modified own occupation definition.
Finally, there is the stringent “any occupation” definition. This means, simply, if you can work in any gainful occupation (for which you are reasonably suited, considering your education, training, and experience), the carrier will deny benefits. So, under this definition, you won’t receive a disability benefit based on your education and experience as a massage therapist because the insurance carrier says you can work as a Walmart greeter.
The plans we work with contain the favorable true own occupation definition for massage therapists. Moreover, you can align this definition to match some or all of your benefit period.
Disability benefits are income tax-free. As we mentioned, the benefits from group disability insurance plans are typically taxable.
There are various additional benefits available including, but not limited to, partial disability, recurrent disability, and a survivor benefit if you were to die from your disability within a specified timeframe.
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 massage therapists include:
Return of Premium Rider: You get your premium money back if you never submit a disability claim.
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. You generally can purchase additional coverage every 2 years up to age 55. (You do not need to wait 2 years if you had a life change, defined as a marriage the death of a spouse, divorce or birth or adoption of a child; Instead within 3 months of a life change, you may purchase additional coverage.)
Retroactive Injury Benefit Rider: Pays benefits from the date of disability due to injury if 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 or cognitive impairment.
Residual Disability Rider: This rider will pay a benefit if you return to work in your occupation, and you experience an income loss of 20% or more compared to your pre-disability income. Usually, the amount of disability income you receive is a percentage of your total monthly disability benefit. For example, let’s say you return to work and experience a 40% income loss. If your monthly disability benefit is $4,000, you will receive $1,600 ($4,000 X 40%).
Protect Your Business If You Are A Business Owner
Business owner or 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. This is an additional reason why massage therapists need disability insurance. Contrast this policy to a traditional disability insurance which pays a percentage of your income.
Carriers who offer this type of insurance typically offer a discount on a disability insurance policy. Additionally, we only work with carriers that offer an occupation upgrade as well, which means lower premium cost, all things being equal.
The Disability Insurance Program Through The AMTA
The American Massage Therapist Association (AMTA), and some of the other massage therapy associations, offers its members disability insurance. The Hartford underwrites the disability insurance for the AMTA.
Nearly all disability insurance policies offered through associations are on a group basis. If you read our excerpt above about group insurance, you know your disability insurance benefits are taxable income.
Moreover, association disability insurance programs tend to be “plain vanilla”, which means they are simple and basic in nature and may not meet your specific needs. However, because of the simplicity, they tend to be lower in cost as well.
In our opinion, the disability insurance through the AMTA is no different. There are benefits and drawbacks. Here they are.
• very low monthly cost
• easy application
• non-medical underwriting at underwriter’s discretion
• spousal coverage, even if he or she is a non-AMTA member
While these are positives, the plan contains many drawbacks which we discuss next.
Disadvantages of the AMTA Disability Insurance Plan
• limited monthly benefit – the most you can receive is $4,000 per month (which, keep in mind, is taxable to you). This amount equates to $68,000 annually. If you earn more than this, you’ll have a potential income replacement gap. For example, let’s say you earn $100,000 as a massage therapist. That means your maximum income replacement is about $5,800 per month. If you have the AMTA disability insurance for $4,000 and go on a disability claim, how will you come up with the additional $1,800 per month? Will you have to take an early, penalty distribution from your retirement account?
• benefits are taxable – as discussed previously.
• modified own occupation definition – we don’t know if the plan’s definition is a true own occupation or a modified own occupation. Based on the description, the definition sounds like modified own occupation, which isn’t as bad as “any occupation”, but not as good as true own occupation. As you know, a true own occupation definition will allow you to work in another job while receiving disability benefits.
• no residual disability benefit – a majority of disabilities start out as a partial disability. You suddenly have trouble with your wrist or your back, and your doctor limits you to working 2 days per week instead of 5. This is partial disability. You can still work, but not full-time. Cancer, Multiple Sclerosis, arthritis…you name it, can start out with a partial disability. Under the AMTA plan, the policy won’t pay. Why? It will only pay a partial benefit once you are totally disabled (i.e not working at all) and meet your elimination period. But, you are working and your doctor says you can work…see the problem?
A residual disability benefit will pay without the total disability requirement. You generally need a certain loss of income, loss of work time, or a combination of both.
The Best Disability Insurance For Massage Therapists
Is the AMTA disability insurance right for you? Maybe. Maybe not. In our experience, we think the disadvantages outweigh the advantages.
You are probably wondering who we like to work with. First, we work with many disability insurance carriers. So, we are sure we can find one that meets your needs and budget. They all meet the true own occupation definition as well have the important residual disability benefits.
However, there is one carrier that stands out to us. That carrier is Illinois Mutual. An A- rated carrier, Illinois Mutual operates in the middle-income market. More specifically, it offers a niche product designed for professions like massage therapists. They offer a variety of options that customize to your specific situation. Moreover, the premiums are generally very competitive. They even offer simplified underwriting (i.e., no medical exam) in many cases.
We also work with a good carrier on the group insurance side. If you would like to insure yourself and someone else in your company, Reliance Standard offers a great long-term disability plan. Depending on the number of participants, you could apply at guaranteed issue (which means no medical underwriting)! Family members and spouses can apply, which is usually not the case with most small group insurance plans. Monthly benefits are up to $7,500 per month. This plan is great for husband and wife massage therapy groups or family businesses. For example, a 2-person husband and wife massage therapy company can apply and receive disability coverage.
And, what about premiums, you ask? Depending on your health and riders, the premiums for individual disability insurance could run anywhere from $1.00/day to $3.00/day. Think that is expensive? I bet you buy coffee almost every day 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 hope now you have a solid idea why massage therapists 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 use the form below. We only work for you, your family, and your best interests only. We have helped many massage therapists secure the right disability insurance for their specific situation, giving them and their families peace of mind.