In this article, I discuss 3 great reasons why teachers need disability insurance.
I also go into detail about what constitutes a great policy, discuss underwriting, and discuss costs.
This is a complete guide for teachers and educating them on disability insurance.
If you are a teacher, you may not think you need disability insurance. You may already have some through your employer. But, as we will discuss, that may not be enough.
Your job is more important than people realize. Each day brings something different. The impact you make on your students can be felt for years.
However, what if you could no longer do your job?
Have you ever thought about what would happen if you became sick, ill, injured, and disabled?
How would you pay your bills if you could not work?
- What Is Disability Insurance?
- 3 Great Reasons Why You Need Disability Insurance
- The Characteristics Of A Strong Policy
- How Carriers Underwrite Your Application
- Estimated Premiums Of Disability Insurance
- Disability Insurance Through Your Union Or School
- Final Thoughts About Disability Insurance
Let’s jump right into discussing what is disability insurance.
What Is Disability Insurance?
Disability insurance is, simply, a type of insurance that pays you a dollar benefit if you can’t work due to illness or injury.
Do you need disability insurance?
Many people tell me, “no”, but if you:
Make money, and
You use that money to pay your mortgage, groceries, and other needs, and
If you and your family would be in a tough financial situation if you could not work, then:
It is really that simple.
It’s Paycheck Protection
Think of disability insurance as “paycheck protection”. We have our house, cars, vacations, luxury items, and necessities. Think of all that. All of that is derived from your ability to work and earn an income.
Conversely, all of that is potentially gone with your inability to work and earn an income.
How much benefit do you receive if you can’t work? That depends on how much you make and your income. Depending on your situation as a teacher, carriers might insure up to 60% of your gross salary.
Wait, John. Why don’t I get 100% of my income, you ask?
Good question. Carriers rarely insure 100% of your income or salary. Why? Well, there are a couple of reasons:
- If you receive a benefit, your benefit is income tax-free. So, you pay no taxes on your benefit, and
- To incentivize you back to work
Human nature tells us that if we receive 100% of our income, we probably don’t want to go back to work, right?
There are ways to potentially obtain 100% of your income. It is outside the scope of the article. If you want to learn more, feel free to reach out to us.
As a final thought here in this section, think of disability insurance as a “spare tire”. You really don’t think of your spare tire (or AAA) until you really need it. And, when you do, you are thankful you have that spare tire or the AAA membership. A temporary tire replaces your flat. You are back on the road, and you get your other tire repaired.
Disability insurance is no different, except it gets you back on the road of your life.
3 Great Reasons Why Teachers Need Disability Insurance
Now that we know what disability insurance is, let’s talk about the 3 reasons why teachers need disability insurance.
Wait, John, you say. I am not going to get disabled.
Is that right? How do you know? If you did, you could play the lottery and enjoy your winnings. You can quit your job as a teacher. Know what I mean?
This unknown brings us to our first reason.
Reason #1: A Disability Happens Anytime And To Anyone
The chance of disability for all of us is really high. According to the Social Security Administration, an adult worker has a 1 in 4 chance of experiencing a long-term disability.
That is higher than common scenarios such as passing away from cancer (1 in 7) and even death from a car accident (1 in 107).
Remember, a disability is any injury or illness that prevents you from doing your job. So, a disability, depending on the type of teacher you are, could be a:
- Broken hand
- Cancer diagnosis
- Back injury
- Head injury
- Multiple sclerosis diagnosis
- Torn ACL
- Loss of eyesight
- A stroke
The list goes on and on…
No one plans for a disability. Disabilities do not discriminate. They do not care about your ethnicity, your job, or how much you make. A disability occurs when you least expect it.
Tiger Woods knows this. Recall his horrible car accident. He left his hotel at 7AM. Around 7:10, he became disabled. His job is golfing, and he can’t do that.
The difference between Tiger Woods and us is he has millions to live off of. We don’t.
What if you faced a situation where you could no longer work? That is a disability.
What if you can’t pay your bills because you can’t work?
However, a disability isn’t only a severe accident. It can be a cancer diagnosis, an ALS diagnosis, weird nerve pain shooting through arms that prevents you from using your hands.
Any type of illness or injury that prevents you from doing your job is a disability.
What would you do if you could not bring in an income to support your family?
Now, do you see the importance of disability insurance?
Reason #2: A Disability Could Last A Long Time
Disabilities could last a while. I am aware of the statistics floating around the internet. There is one that suggests that the average disability lasts almost 35 months. Possibly. The claims departments I speak to suggest, on average 18 months to 24 months. Nevertheless, could you and your family survive financially from 1.5 years to 3 years – or more – if you can’t work?
Some disabilities are longer. Disabilities from mental illnesses or alcohol/drug abuse can last years. How do you know these unfortunate situations won’t happen to you?
Conversely, some are shorter. We just had a client who came off a claim from Leukemia. He was out of work for almost 11 months.
The moral of this section is you really don’t know. Disability insurance protects you from this unknown. It pays you a benefit, which in turn you can focus on your rehab, treatment, and family. Which, brings us to our next section.
Reason #3: More Important People Rely On You
Here’s another important reason. You may think your students are the most important people. Who can be more important than them, you think. They are the reason I am a teacher.
True. They do matter. Let’s be honest, though, your students – or even the administration or school board – 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.
If you are disabled, without disability insurance, 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.
I call disability the destroyer of dreams. Your future and family dreams could be destroyed. I’m being honest here.
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.
Remember the spare tire/AAA analogy. That is the sole purpose of disability insurance: to provide payments to you in case you can’t work. Then, you can focus on rehab / getting better and getting back to work.
The Elements Of A Strong Disability Insurance Policy For Teachers
Hopefully, we have made a great case showing why teachers need disability insurance.
I’m ready to enroll now, John, you say.
Sounds great. First, though, let’s discuss the characteristics that make a strong policy.
You see, there are many policies that offer limited benefits.
You don’t want to mess with those policies. The worst thing that could happen is you file a claim, expect a payout, and don’t receive one.
So, let’s first discuss the basic elements needed in any disability insurance policy for teachers.
Disability Insurance Policy Basics – Elimination Period & Benefit Period
I speak to professionals, including teachers, about disability insurance every day. There are 2 major sources of confusion that these professionals hear from elsewhere. These confusing components are simply policy basics, but if you get these wrong, you could be in for a surprise when it comes time to make a claim.
The first is the waiting period or elimination period. In terms of disability insurance, it is not the period of time before your policy is in effect. That is correct for other types of insurance, but not for disability insurance.
The elimination period is the length of time – a waiting period – that elapse before you are eligible for disability benefits. It happens upon the claim. For example, a 90-day elimination period means your benefit period will begin after 90 days of disability. On the 91st day, you are eligible for benefits. Typically, you receive your first benefit 30 days after that.
So, if you have a 90-day elimination period, you will receive your first payment on or around day 120 of disability.
This means you need to have adequate savings to carry you and your family until benefits begin.
The second is the benefit period. The benefit period starts when you are eligible for benefits and lasts until the end of the benefit period or if you return back to work, whichever occurs first. It is not the maximum timeframe that your policy exists. As long as you pay the premiums, you will have the policy until age 65 or 66 – at retirement age.
The maximum benefit period for teachers is to age 67. This means you will have disability benefits for your working career, if you choose. However, a 5 year benefit period might work just fine, too.
The Disability Definition Matters
The definition of disability matters. You generally want some type of “own occupation” coverage.
What is “own occupation” coverage? It means the carrier bases your claim approval (and subsequent payments) on your inability to do your job. In this case, teach.
There are several types of own-occupation definitions. The most common are “true” and “modified”. What is “true own occupation”? Simply, it means you can continue to work in another occupation while receiving disability benefits for the inability to do your job as a teacher.
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 inability to teach. However, you can’t work in another job. So, if you work as a Walmart greeter, you won’t receive disability benefits under the modified own occupation definition. This is a good definition, too.
Be Aware Of The “Any” 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), you’ll be denied benefits. So, under this definition, you won’t receive a disability benefit based on your education and experience as a teacher 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 teachers. Moreover, you can align this definition to match some or all of your benefit period.
Do you need “true” own-occupation definition? Maybe not. It might depend on the type of teaching you do. If you are an elementary school math teacher, maybe not. However, if you are a piano teacher or industrial-arts teacher, an own-occupation definition might be prudent.
2 Important Disability Insurance Elements For Teachers
When I review quotes, I usually see 2 elements missing from most quotes or policies. It is imperative your policy contains the following.
Residual or Enhanced Partial Disability Benefit
The disabilities we have implied so far in this article are total disabilities. In other words, you can’t work at all.
However, many disabilities start out or end as a partial disability. What if you can work, just not full-time?
This is where you want partial disability benefits. A plan that offers partial disability benefits pays a pro-rated benefit of the time or work lost because of the partial disability.
Many policies offer an enhanced partial disability benefit. This provision pays a benefit if you work in your occupation on a part-time basis due to an illness or injury.
Usually, the amount of disability income you receive is a percentage of your total monthly disability benefit. For example, let’s say you work 3 days a week now and therefore experience a 40% income loss. If your monthly disability benefit is $4,000, you will receive $1,600 ($4,000 X 40%). This is a simple example to illustrate.
However, beware. Many policies state they have partial disability benefits. But, when you read their definition, it states that partial benefits are paid after a period of total disability.
This means if you are only partially disabled (i.e. you can still work, but not full-time), you will not receive any benefits until you have met the carrier’s requirements of a total disability first.
That could be years before you become totally disabled. Take multiple sclerosis or carpal tunnel syndrome. Both of these conditions may start as a partial disability. However, if you don’t have adequate partial disability benefits, you won’t receive anything until you are totally disabled.
This scenario underscores the importance of partial disability benefits.
Proper partial disability benefits circumvent the total disability requirement and allow you to receive benefits immediately (after you satisfy the elimination period) if you are partially disabled.
Guaranteed Purchase Option
Let’s say you purchased a disability insurance policy 5 years ago. Your salary is now $25,000 more than what it was when you applied. You are now underinsured if you make a claim.
What do you do?
If you have a guaranteed purchase option, you can purchase more disability insurance with no evidence of health insurability. In other words, you don’t need to go through underwriting again.
That means if you now have type 2 diabetes or Multiple Sclerosis (for example), you can still purchase more disability insurance. How great is that?
You just need to prove your income increased, usually through a tax return or your W-2 stub.
I’ve seen many policies where this option is left off. If you don’t include this option at the time of application, you will then need to reapply for a new policy if you want more disability insurance. If your health changed in any way, you could face benefit limitations, higher premiums, or declined altogether.
You can see how important this option is.
Optional Disability Insurance Riders For Teachers
You can add optional riders at an additional cost to your policy to best fit your needs and budget.
Disability insurance is very customizable. If you want more benefits, expect to pay more in premium. Some popular rider options for teachers include:
Return of Premium Rider: You will receive the premiums you paid back if you never make a claim.
Retroactive Injury Benefit Rider: Pays additional 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. Additionally, it will pay if you are cognitively impaired. This condition is a catastrophic disability. In other words, this rider will pay an additional benefit if you need help or assistance with the first 20 minutes of your day – dressing, toileting, eating, transferring (i.e. walking), etc.
Accident Plan: pays an indemnity benefit (i.e. fixed dollar benefit) if you are hurt or injured and go to urgent care or ER.
Mental/Nervous/Drug/Alcohol Extension: Most carriers provide a 2 year benefit period only for disabilities caused by mental or emotional disorders (like depression) or by drug/alcohol abuse. This option extends the 2 year benefit period to your contracted benefit period.
How Disability Insurance Carriers Underwrite Your Application
It’s important to understand how disability insurance carriers underwrite your application.
Oh, I just went through the life insurance process. I know how it works, you say.
Great. But, disability insurance underwriting is completely different.
Carriers aren’t insuring your mortality. They are insuring your morbidity. In other words, the risk of a disabling accident or illness and paying you a percentage of salary.
So, carriers look at the following attributes in an application.
When it comes to underwriting, carriers look at your:
- Income / Salary
- Other hazards and lifestyle situations
Age is a factor. The older you are, the more expensive the policy – all things being equal, of course. This is why you want to start your policy as soon as possible.
Obviously, your health matters. If you have a chronic illness or had a severe injury in the past, likely that illness or injury won’t be covered. Additionally, carriers can limit benefits based on any health conditions.
As we mentioned before, carriers insure a percentage of your salary. This percentage is usually 60% of your gross salary.
Your Teaching Occupation Matters
Your teaching occupation matters as well. All the disability insurance carriers classify your occupational disability risk. The classification table is usually a 1 to a 5 (or 6 with some carriers). An occupation with a class 1 is most risky while an occupation with a class 5 is the least. For example, carriers classify a construction laborer at a 1 and an accountant at a 5.
The classification for teachers, well, depends.
It depends on…
…which carrier you use (some carriers categorize all teachers as a 5)
…your education level (some upgrade your classification if you have a graduate degree)
…where you teach (if you are a college professor, you may receive a classification upgrade)
…what you teach (a math teacher will have a higher classification than an industrial arts teacher)
Finally, carriers also consider other situations and lifestyle choices like hazardous hobbies. Do you like to rock climb? If so, that hobby will be excluded from your policy. (Related: see our article on how disability insurance underwriting works.)
What Do The Carriers Do With The Information?
The underwriters review all this information and make an approval decision or not. They routinely look up your medical background in the MIB, prescription drug databases, driving records, tax records, etc.
As we discussed, certain situations may limit benefits, your benefit period, and/or waiting periods. Carriers may also increase premiums to compensate for an increased disability risk.
Nevertheless, if your benefits are modified in any way, it still makes sense to purchase the policy. We discuss more in our disability insurance underwriting guide.
How Much Does Disability Insurance Cost For Teachers?
That’s the $64,000 question. Well, the premiums you pay are a function of everything we discussed above.
However, disability insurance is not incredibly expensive.
Depending on your situation, disability insurance costs between $1.00 and $3.00 per day. Sometimes it is more; sometimes it is less.
The cost is about the cost of a cup of coffee at your favorite coffee shop.
If you can afford a cup of coffee, or lunch, you can certainly afford disability insurance.
For example, a woman aged 40, making $50,000 annually could have a $2,500 monthly benefit, own-occupation definition policy for around $72 per month or $2.40 per day.
Again, the cost could be more or less depending on various factors.
What If My School Offers Disability Insurance?
This is a common scenario for teachers. Many unions, private schools, and colleges offer disability insurance to their teachers and professors.
John, my school offers disability insurance. I’m all set.
That is great they do. However, you aren’t all set. We explain more.
It’s Group Disability Insurance
Disability insurance through your school, union, or college is group insurance. Group insurance is different than individual, private insurance.
For instance, many group disability insurance policies are limited one way or another. For example, we reviewed the group policy of a woman who makes $100,000 annually. She was astonished to find out her group disability insurance policy provided a maximum $2,000 monthly benefit. That amount is well below full coverage for her.
Additionally, that benefit from your group policy is taxable. That means you have to pay income taxes on it. Your employer will note this responsibility on your W-2 in January. Note that if you make a claim against your individual policy, the benefit is not taxable.
So, if your employer’s plan pays 60% of your salary as a benefit, that might mean you are netting 40% (or around there) post-tax.
Can you live off of 40% of your salary? Possibly. Most people probably can’t.
That is where an individual plan helps. You can “stack on” an individual plan on top of your group disability plan. Your individual plan will offset any tax impact and bring your overall disability benefits in line with your income.
Is it expensive? Usually, never.
To illustrate, Let’s use the same example previously with the 40-year-old woman, making $50,000 annually. Her school offers a group disability insurance plan, in which they pay 100% of the premiums. She receives a $2,500 benefit from her group plan.
If she files a disability claim, that $2,500 is taxable. Based on her situation, she can purchase a supplemental plan. She could purchase up to a $1,000 monthly benefit for about $25 per month. That is only $0.75 per day.
The $1,000 will offset any taxes. Additionally, it provides a more complete benefit for her and her family.
Final Thoughts About Disability Insurance For Teachers
We hope now you have a solid idea of why teachers need disability insurance. We also went through the elements that make a strong disability insurance policy for teachers.
Additionally, we discussed the underwriting requirements. Moreover, we discussed the need to have an individual plan even if you have a group disability insurance policy through your school.
Are you 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. You can use the form below. We only work for you, your family, and your best interests only. We have helped many teachers secure the right disability insurance for their specific situation, giving them and their families peace of mind.