In independent publishing, our limited time and resources seem to be devoted to keeping the company healthy, and too often we neglect to consider the consequences of personal health problems. Many of us have basic health insurance, but if we are considering additional coverage, too often we think about dental coverage before disability. Yet when was the last time you ever heard of someone bankrupted by dental problems?
Do yourself a favor. Check into disability coverage.
A Look at the Odds
Consider the following statistics supplied by Argo Insurance Brokers Inc. of Pleasant Hill, California (PMA has forged a cooperative relationship with this company to make a range of insurance coverage available to our members at the lowest-possible cost):
- 1 in every 5 working people will be disabled for 5 years or longer before age 65.
- Nearly 1 in every 4 Americans will need long-term care at some point in their lives.
- In the general population, one’s chances of dying at any given time are 1 in 105, but the odds of incurring a disability that will take you away from your work for at least 90 days are only 1 in 8.
Disability is 66 times more likely to result in foreclosure of a home than death or a financial crisis. And by extension, consider the effect of disability on your publishing enterprise. Many of us could not afford to hire someone to replace ourselves and continue paying a salary to ourselves at the same time. So should we become disabled, our companies will be put at risk too.
Why don’t we have disability coverage? “Because the average person tends to think of himself as indestructible and immortal,” says Eric Ruiter, a broker with Argo.
How Disability Insurance Works
The purpose of disability coverage is to replace a portion of your income and to help provide financial stability while you are disabled. For example, a company policy covering 5 principals and 10 employees can be purchased for as little as $6,000 per year. “For $500 a month, they can sleep easily at night,” Ruiter says.
Rates are based on age. Consider the example of an employee who is 40-44 years of age, earns $3,000 per month, and is covered under a mid-range policy (three basic options are available) with a 5-year benefit period and a 90-day waiting period following onset of the disability. That employee is covered at a cost of $18 per month for replacement of 60% of his or her salary (a standard percentage). If disabled, that employee would receive $1,800 a month for up to 5 years. By comparison, the premium for similar coverage of an employee under 30 would be $7.20 per month while the premium for an employee over 60 would be $75.24 per month.
If you can afford it, the best disability coverage clearly is an individual policy. But the premiums are substantially higher. And the insurer will ask a lot of questions about your health. An advantage of group coverage is that some group plans do not ask any health questions, which is then balanced with the pre-existing condition limitation. Realistically, a group policy may be the best and perhaps only alternative open to the small independent publisher for management and staff.
Keep in mind that payment of benefits does not require a permanent disability.
The Ways that Policies Differ
The variables in a group disability policy include:
- Waiting period for disability payment. This ranges from 30 to 90 days, although many smaller-sized companies can and do bridge that gap by voluntarily continuing a disabled employee’s salary, or a portion of it, until benefit payments become available.
- Benefit duration. Two options are offered. One provides benefits for 5 years after a claim has been made. The other offers benefits upon filing a claim until you reach age 65. Of course, the latter option comes with higher premiums than the former.
- Benefit percentage. The typical group policy pays 60% of a disabled employee’s salary.
- Maximum benefit. $6,000 per month.
- Pre-existing limitations. Typically, a 24-month waiting period is required before disability coverage begins, if the disability is related to the pre-existing condition. Definitions of pre-existing conditions vary.
- Total disability. Definitions and benefits vary.
This is a once-over-lightly analysis. Be sure to carefully read descriptions of the coverage, ask a lot of questions, and perhaps contact another broker to compare premiums.
Kent Sturgis is President of Epicenter Press Inc. of Fairbanks, Alaska, and Seattle, Washington, and a PMA Director who chairs PMA’s Members Services Committee. If you have suggestions for this committee, please contact him by phone 425/485-6822 or e-mail firstname.lastname@example.org.
Argo also offers medical, dental, life insurance, long-term care, and 401(k) profit sharing in addition to a business-liability policy soon to be offered that will be tailored to the specific needs of publishers. Look for an announcement of this new policy in a future issue of the newsletter. For more information, contact Eric Ruiter at Argo Insurance Brokers Inc., Box 232017, Pleasant Hill, CA 94523, phone collect 510/682-7001, fax 510/682-7024, or e-mail email@example.com.