An Essential Guide to Disability

By Larry Schneider

Let’s cut to the chase. There are many reasons why I think agents should sell disability. But here are my top reasons:

  1. It is a great door opener that places you above your competition
  2. There’s very little competition
  3. First year commissions (50 percent) and renewals (10 percent) are outstanding
  4. Persistency
  5. No need to re-quote every year, rates are guaranteed
  6. To avoid being sued when a disability occurs and your client asks ”Why didn’t you recommend this type of coverage to me?”

Disability In a Nutshell

Could you continue to pay your personal daily living expenses (food, rent etc.) if you were unable to work for any length of time because of a disabling injury or sickness? Do you know how much money would still be coming in each month and from what source should you become disabled?

For someone between the ages of 35 and 65, chances of being unable to work for 90 days or more because of a disability are between 35 and 50 percent.

Some people can rely on disability benefits from their employers and/or the government, but for a great many workers, income stops when work stops! Disability income protection insurance is designed to replace lost income when that happens. 

Disability income insurance can provide your clients with a tax-free guaranteed income should they become sick/injured, whether it be as a result of an on or off-the-job disabler. It helps to protect a family from financial catastrophe by providing income to help meet daily expenses and can come in two forms as follows:

A variety of employer-paid (group disability) and government-sponsored programs, generally cost-free (taxable) to the worker.

Private policies, paid for by the individual, which protects income when there is no other applicable coverage, or when available programs do not adequately meet needs. 

Group Disability

Most employers allow some short-term sick leave. These might last anywhere from a few days to six months, depending on company policy and length of employment.

No law exists that require employers to offer group long term disability coverage. However, approximately half the medium and larger sized companies offer coverage for at least five years. Typical plans cover 60 percent of salary and are fully paid by the employer. As a result, benefits are taxable, thereby reducing the benefit amount. Individuals should check with their company benefits office to see if they are covered, for how long and what the benefit amount offsets might be (reductions from other disability programs, including workman’s compensation, social security etc.)

What About Social Security Benefits?

Most workers participate in these benefits and besides providing retirement benefits this government program also provides benefits for a covered disability.  Salary, prior income and number years worked, determine how much anyone might receive. Good to know:

People are only eligible for disability benefits after they’ve been disabled for 5 months and only if the disability is expected to last at least 12 months. These benefits might be reduced by other programs and eligibility is based on the inability to perform ANY gainful employment, not just the duties of the job the person was doing at the time of disability (and thus a 72 percent denial rate). These benefits can also be taxed.

Eligibility For other Disability Income Benefits

There may be other potential sources of income, should someone become disabled, for example…Workers compensation (only for on-the-job injuries), Veterans Administration pension benefits, civil service, black lung for miners, union benefits, automobile, private disability coverage, Medicaid ,etc. 

How Much Coverage Is Enough?

Add up all of the benefits a client is entitled to plus their savings. If the total approaches the required income needs after taxes, you can assume they have enough to cover their expenses while recuperating from a disability. If not and they are eligible, they will want to consider buying individual disability insurance to make up the difference. A special note for the self employed…Purchasing your own coverage can be particularly important, not only will you not receive benefits from a group plan, but your entire business may suffer as well.

Essential Knowledge

Selecting the amount and duration of disability insurance benefits is only the first step. You want to make sure coverage won’t be canceled so you must ask about the policy’s renewability and rate increase provisions. Disability insurance policies have three different types of renewal guarantees: 1) non- cancelable and guaranteed renewable policies, give you the right to continue coverage without threat of cancellation, wording changes or rate increases upon timely payment of premium. 2) guaranteed renewable only policies, only takes away the threat of being cancelled, but allows the carrier to increase rates. 3) Least expensive of all, optionally or conditionally renewable policies (no guarantees). These only renew the policy for a set period of time, usually just one year and rates can  be increased. Most all types of policies include a waiver of premium, which means after the deductible has been satisfied (usually 90 days) a disabled person doesn’t have to make payments and if and when they return to work, back payments are forgiven. There are a few other options that are available that take care of other circumstances. Protecting one’s ”own occupation” which should be the basis for satisfying the definition of total disability (this governs how your disability is viewed for claims purposes) is also very important.

In general, premiums paid by an individual means the benefits are tax free. If an employer pays all or some of the premium, then all or some of the benefits are taxable. When you buy an individual policy, buy one that covers for both accident and sickness. In fact, as one gets older, it is more likely that a disability will result from a sickness than from an accident.


Larry Schneider is a disability specialist with over 45 years of exclusively specializing in disability insurance with over 50 published articles. He is the owner of Disability Insurance Resource Center. He can be reached at:,  For more information on his company and his CV, his website is: Toll free number is: 800-551-6211 Schneider is also an expert witness consultant for claims which have been inappropriately denied and a national resource for hard-to-place applicants as well as a brokerage for standard cases. Schneider was instrumental in rewriting the American College’s DI manual. He’s one of the founding members of the International Disability Insurance Society and has published an Encyclopedia of Disability Insurance manual.