Life is made up of various risks. We live with those risks every day. Some risks are easier to recognize than others, like the risk of being pulled over by a cop vs. getting to your destination faster when we drive too fast. Some risks are less apparent but can be financially catastrophic if they happen. For those less apparent risks, there are insurance products.
Car Insurance helps ease the risk of having to incur the entire
cost of repairing cars after an accident.
Life Insurance helps ease the risk of family members being left
in financial straits after the passing of a loved one.
Income Protection Insurance (also known as Disability Insurance)
helps ease the risk of financial ruin while recovering from an unexpected
illness or injury that keeps you from earning money.
For each of these risks, there is a possibility of financial
disaster, insurance is there to take some of the unknown risks we incur every
day, just by living, and transfers some of it to a company willing to take that
A LifePreserve Short-Term Income Protection Insurance Policy covers both injuries and illnesses, but most people tend to focus on the injury portion of it, imaging something catastrophic. But, do not forget that several illnesses can keep you from working for multiple weeks.
Case and point, the New York Jets franchise QB, Sam Darnold, could miss his 3rd game due Mono. For Sam, it’s all good because his contract is guaranteed (to be fair he’s still suffering from Mono Sick Emoji, so it’s not ALL good). For someone without a guaranteed contract, missing four weeks of work (including the bye week in Sam’s case) accounts for:
Two paychecks if you’re a full-time employee or
Four weeks of pay if you’re a freelancer or work in the Gig-Economy
Hopefully, you’d have some paid sick time off or vacation time if you’re a fulltime employee, but there’s no guarantee on that and if you freelance then it’s all on you.
You might say, “Sure, but Darnold can’t return because of an enlarged spleen, I’d be able to go to work with that as long as I was feeling better” and to that, we say, correct! A lot of people could return to work when they aren’t feeling the effects of Mono, but the effects can last up to two months.
You may also say, “I’ve got money saved up, I’m good,” and to that, we say, awesome! If you can cover your expenses while you’re out and not getting paid, then it’s all good. But that’ll be money coming out of your savings which can leave a pretty nasty dent in your nest egg.
To go back to our post from earlier today, we’re not saying it’s GOING to happen to you, but it could, and that is the type of risk insurance covers, the risk of the unexpected. Income Protection Insurance helps protect you from not collecting an income when you’re sick or hurt and can’t work.
Now, let’s all hope that Sam is back on Sunday because the last couple of games have been BRUTAL! #longsufferingjetsfan
Want to learn more about our Short-Term Income Protection Insurance policy?
The question of “how much short-term income protection insurance do I need” may seem silly. I could imagine your response would be “the same amount as I earn every other week when my paycheck arrives.” But, when it comes to Income Protection Insurance, the answer isn’t as easy as it would seem.
Income Protection Insurance wasn’t created to protect your entire salary, it was created to protect a healthy portion so you can live your day-to-day life. We recommend having enough insurance to at least cover your fixed expenses each month, though you can insure up to 80% of your monthly pay.
In this article, we’re going to help you figure out the bare minimum amount of your income you should consider covering, those fixed expenses we mentioned above. The best part, if you haven’t had a clear understanding of what you spend your money each month, you should have a better understanding by the end of this article.
Let’s talk about need. Need is a word that seems relative. Hell, I feel like I need to binge Netflix every night, but when I drill down to the heart of the question, of how much money do I need to have come in every month to keep my life in order, that’s a whole different question. Let’s define need before we develop a plan for figuring out your need. According to the dictionary.com, the definition of need is “a requirement, necessary duty, or obligation.”
In our opinion, the best place to start is with the three necessities of life: food, water, and shelter. How much does it cost to have a roof over your head each month? Consider your rent or mortgage payment each month because you’ll want to make sure you have enough money to keep you in your living space. From there, you’ll have to drill down (this is where the water part comes in) how much do you spend on utilities monthly? We’re talking, electricity, water, heating, etc. Utilities may be included in your monthly rent, but if it’s not, make sure to calculate it in because if you’re disabled, the last thing you’re going to want is to have your water turned off.
Your next consideration, the amount you spend on food because we all need to eat right! Whether you spend it all on groceries or if you eat out a bunch, you’ll have to eat while you’re disabled so make sure this is a part of your calculation. Btw, if you pride yourself on cooking more than eating out, you should at least consider that you may order food more while you’re out on disability because, depending on the type of disability, you may not be able to cook or may not have the energy to cook.
After we’ve gotten the basics covered, it’s time to look at your debts. Do you have a credit card you pay monthly or are you one of the 44 million Americans that have student loans? Make sure you get every one of these monthly payments into your calculation. Your debt holder may be willing to work with you if you don’t have the money initially, but you won’t want to take that chance if you can help it because being late with your debt payments can be devastating in the long term.
Perfect! We’ve got food, water, shelter, and debt payments done, you’re crushing it! But, of course, there’s more you need to consider. If you’re disabled, how would you get around? Use your car (that you may have monthly payments on) then you’ll need to get gas and maintained. Using Uber, that costs money each trip. Either way, it all gets calculated into your monthly need.
Tack on any monthly insurance costs and (if you’re a parent) the cost you may incur in additional childcare and you’re still not done because there’s another, insidious, hidden cost to a disability: The medical expenses you’ll incur from your disability when your unable work.
We’ve found that this is usually an element of fixed monthly costs people do not take into account because they haven’t happened yet. But rest assured, they will come and when they do, if you’ve taken the right precautions, your insurance coverage should be able to help get you through until either you are better and back at work, able to tap into a Long-Term Disability Policy or apply for Social Security Disability Insurance.
Finally, take a moment to think about the things you can’t live without. I’m a huge fan of a morning coffee from my local coffee shop, but I could also do without Netflix for a bit. Either way, it’s good to consider all the little things in life that would help keep you a least a bit happier during a disability. If you need ideas on what these things may be, look over your monthly bank statement or credit card statement. You’ll see trends in spending that you may not think about on a day-to-day basis.
Once you’ve considered all your monthly, fixed expenses and the things you can’t live without adding them all together and you’ll get the amount of your income you need to insure to get by while you’re out of work on disability.
So that’s it. You have the total amount of monthly cash flow you need to insure to get through a short-term disability. Your next step is to take this information and find the insurance policy that fits your needs the best. You can learn a little more about what goes into the calculation of an Income Protection Insurance policy here, so you’re armed with a bit more information as you continue your research.
Let us know if you have any questions by leaving a comment here or email us at email@example.com.
We get a lot of questions about pregnancy coverage in our Income Protection Insurance Policy. We’re specifically asked about coverage for regular childbirth most often. We hope this post provides some transparency into how we built and priced our Income Protection Insurance policy and individual policies in general.
We’ll write more about the in’s and out’s of our policy in future posts to help you learn about our products and Income Protection Insurance (aka Disability Insurance, aka Paycheck Insurance) in general.
We built our Income Protection Insurance Policy to cover unexpected illness or injuries from the time you buy it. Pregnancy is generally a planned decision made by two people with childbirth being a cause of the pregnancy. Not everyone’s situation is the same, but the ability to cover regular childbirth in an individual disability insurance policy is almost impossible because someone could buy a policy right when they are planning on trying to get pregnant.
Unexpected issues stemming from pregnancy like doctor-ordered bed rest could qualify you under the LifePreserve Income Protection Insurance policy, but it all depends on the situation.
No matter who you buy your policy through, a disability claims expert should be there to help guide you through the process. We’ll get into the claims process a little more in depth in a later post.
Some short-term disability group plans may provide benefits for regular childbirth, but there are usually terms and conditions around it so make sure to consult your policy, and insurance professional provided by your employer for full details and limitations.
If you have any questions feel free to leave a comment below or message us at firstname.lastname@example.org