You might not consider disability insurance for attorneys and lawyers because you don’t work a risky job. Why worry about disability when you sit at a desk and counsel clients all day?
Disability insurance covers more than injuries at work. It is financial protection for you and your family should you become ill or injured and unable to work. You could be unable to work for hundreds of reasons, including chronic illness, a freak accident, or even mental health issues.
Here’s everything you must know about disability insurance for attorneys and lawyers.
What Is Disability Insurance for Attorneys & Lawyers?
Disability insurance for attorneys and lawyers protects your investment in the many years of college and law school you made. You invested time and money into law school to be able to work as a lawyer for many decades.
However, if you become disabled, you may lose that opportunity and lower your return on investment. The average law student leaves school with between $118,100 to $158,610 in debt from law school alone.
If you become disabled physically or mentally and cannot perform your duties, you’ll need disability insurance to replace your income.
What Disability Insurance for Attorneys Covers
Disability insurance doesn’t provide 100% income replacement. Most policies replace an estimated 60% of your income.
Depending on the type of policy, your disability insurance may replace your income if you cannot work as an attorney or any job. There are short and long-term policies, and each company considers different illnesses and injuries.
Common issues covered under most disability insurance policies for attorneys and lawyers include:
- Musculoskeletal issues
- Mental health issues
- Physical injuries
Short-Term Vs. Long-Term Disability
Benefits for Different Lengths of Time
Short-term and long-term disability provides benefits for different lengths of time.
For example, short-term policies cover you for less than a year, but the average policy has a benefit period of three to six months.
Long-term disability provides long-term benefits, sometimes until you reach retirement age or 65 years old. If you purchase a term policy, they usually come in terms of 5, 10, or 20 years.
Amount of Income Replacement
Another difference between short and long-term disability for attorneys and lawyers is the amount of income replacement they offer. Short-term policies tend to pay more because they are for a shorter period of time.
Many policies pay as much as 70% of your income. However, long-term policies pay less, usually 40% to 60% of your income, depending on the policy.
How To Choose Between Short-Term & Long-Term
When choosing between the two policies, consider this.
Do you have an emergency fund to cover your expenses for a few months if you become disabled? If you have at least six months of expenses saved, you may not need a short-term policy because you can cover your costs.
Most lawyers need a long-term disability policy, though. Most people don’t have the means to cover expenses for a few years or even the rest of their life.
Own Occupation Vs. Any Occupation Coverage
When purchasing a disability policy, consider the difference between own occupation and any occupation coverage.
- Own occupation – If you cannot work as a lawyer any longer, or for an extended period, own occupation coverage would replace your income up to the percentage stated in the policy. It remains in effect even if you can work a different job. In other words, you won’t be forced to work in a different position you didn’t want.
- Any occupation – Purchasing a disability policy with the term ‘any occupation’ makes it harder to get benefits. With any occupation coverage, you only receive benefits if you can’t work ANY job, not just as a lawyer. Insurance companies have stricter requirements regarding what qualifies as an actual disability with any occupation coverage.
Why Attorneys Need Disability Insurance
Attorneys and lawyers must secure their income like anyone who works and supports their family. Think about what would happen if you were suddenly unable to work. How would your family survive?
Whether you started your career recently or are established, you likely make $50,000 to $180,000 per year. Not being able to earn your income could be devastating to you and your family.
Like most lawyers, you’ve likely settled into a lifestyle you enjoy and, if you were unable to work, wouldn’t be able to maintain. Even if you’re a new lawyer, the chances of your income increasing significantly in a few years are high, and protecting it now can be much more affordable.
Even if you think you’re invincible or are ‘too young’ to become disabled, consider this.
The Social Security Administration states that 1 in 4 20-year-olds become disabled before retirement. Your firm’s group policy likely won’t be enough, and supplementing with an individual policy is the key to financial success.
As mentioned above, group policies are available but usually don’t hold a candle to individual policies.
They can be great for supplementing your individual policy, but most lawyers and attorneys should avoid relying on them.
Many firms offer group policies at no or low cost. Each policy differs but typically provides $5,000 to $10,000 maximum coverage monthly, which may be enough for an attorney in the early years of their career. However, it’s only a fraction of what established attorneys earn.
But here’s the problem.
Your group policy is only suitable if you are at the same firm. If you change firms, you lose your coverage.
Group policies also don’t offer the same amount of coverage. For example, they usually have a much lower cap than individual policies, and many firms provide only short-term group policies, not long-term ones.
Individual disability insurance has more flexibility but stricter underwriting guidelines and higher costs. You also have more flexibility in choosing the terms. For example, you can choose short or long-term, the coverage amount, own or any occupation, and the coverage amount.
Individual policies require underwriting. Insurance companies must determine your risk factors for a disability. They’ll examine your medical history, lifestyle habits, and other areas to determine your possibility of becoming disabled.
The key to getting the best coverage at the lowest premiums is to apply early in your career when you’re young and healthy. If you wait until you’re older, you may have higher premiums, or the policy may have restrictions based on previous health issues.
Associate disability insurance is similar to group disability coverage. You may be eligible through different associations, such as the American Bar Association. They offer an American Bar Endowment Plan through NY Life if you’re a bar member.
Like group policies, the coverage is lower. You lose coverage if you leave the association or change careers.
Disability Insurance Policy Characteristics to Look For
When shopping for disability insurance for attorneys and lawyers, knowing what characteristics to consider is essential.
Cost is the number one factor for most people. Unfortunately, individual disability insurance isn’t cheap. However, there are ways to keep your costs lower.
I already discussed how it’s better to get a policy when you’re young and healthy, but here are some other factors to consider:
- Take a longer elimination period – The time between your disability and when you receive a payout affects your premiums. The longer you wait for a payout, the less risk insurance companies take, which results in lower premiums.
- Length of payouts – Consider carefully how long you need payouts. Look at your financial situation and determine how long you could go without benefits. Consider how long you’d need coverage if you purchase a long-term policy. Do you need payouts through retirement, or do you have money to get you through a few years before retirement?
- Percentage of income – The lower the percentage of your income you need, the lower premiums you’ll pay. Consider how much you’d need to cover your necessary expenses and cost of living, and determine how that equates to your income. Also, consider any other household income you receive.
Look for insurance coverage that the insurance company can’t cancel. Even if you suffer a major health crisis, they cannot cancel your policy or increase your premiums. Once you lock in the policy, it’s yours as long as you make your payments.
Consider how long you need coverage. To determine the right coverage length, look at your savings. Then, ask yourself how long you could cover your expenses without assistance.
Some people want lifetime coverage, others need coverage through retirement, and yet others only need a few years of coverage and have enough money saved to handle the rest.
An individual disability insurance policy is portable. It doesn’t matter where you work or how often you change jobs. However, a group policy isn’t portable. If you leave your employment, you typically lose coverage, which is why individual policies are essential.
Future Purchase Option
A future purchase option rider allows you to increase your coverage without undergoing medical underwriting again. For example, suppose you aren’t yet at your max income, or you can only budget a small premium for disability insurance. In that case, the future purchase option allows you to increase your coverage without underwriting, so you don’t have to worry about medical issues making it hard to qualify.
Always understand the amount of coverage you’ll receive. Each disability insurance policy covers a different amount of income. So do the math and determine what percentage of your income you need to survive, keeping in mind that most policies are for a maximum of 60%.
Try avoiding any occupation disability insurance as they have many restrictions, making it more challenging to get a payout if you become disabled. Own occupation coverage protects your income if you can’t work your specialty. Any occupation coverage only covers your income if you can’t work any job, even one with lesser pay.
Residual Disability Rider
A residual disability rider protects you if you can’t work full-time but can work limited hours. If this affects your pay, the residual rider will make up some of the income you lose by not working full-time.
Unlimited Recovery Benefit
An unlimited recovery benefit is a part of the residual disability rider. In addition to covering the income you lose if you can’t yet work full-time, it covers attorneys and lawyers as they build their books up again. If you’re off for a long time, it can take a while to build your business again. The unlimited recovery benefit will make up the difference until you’re fully back on your feet.
How to Receive Quotes
To get quotes for disability insurance for attorneys and lawyers, you should contact independent insurance agencies or insurance brokers. Only a handful of insurance companies offer long-term disability insurance at the levels attorneys and lawyers need, so be sure to get quotes from as many companies as possible.
Getting quotes doesn’t cost anything, and then you can compare your options side-by-side. Look at the big picture, including length and percentage of coverage, riders, and terms of what they will cover.
Top Disability Insurance Companies
Shopping for disability insurance can be overwhelming. Here are three of the top disability insurance companies to consider.
- Guardian – Lawyers and attorneys can get disability coverage for up to 26 weeks with short-term coverage and up to 20 years with long-term coverage. They offer various riders, including student loan protection, COLA, and catastrophic disability benefits.
- Mutual of Omaha – Choosing Mutual of Omaha offers coverage for up to one year on a short-term and up to age 70 on a long-term policy. They pay up to $12,000 a month if you need long-term coverage. Some common riders they offer include COLA, critical illness, and return of premium.
- Northwestern Mutual – If you want long-term disability that lasts into retirement, Northwestern Mutual offers disability insurance policies up to age 70. They don’t provide riders but allow customers to increase coverage at specific age milestones.
Frequently Asked Questions
Is Disability Insurance Necessary Even With Social Security Benefits?
Social Security benefits usually aren’t enough to cover an attorney’s income. As a result, most attorneys and lawyers use Social Security income as supplemental while relying on money they saved and disability insurance cover for their bills and cost of living expenses.
What Is the Average Cost of Disability Insurance for Attorneys?
The cost of disability insurance for attorneys depends on many factors, including where you live, your age, health, income, and the benefits you want to be included. On average, attorneys pay between $20 to $500 monthly, depending on the coverage needed.
What Are Disability Insurance Occupation Classes, and Which One Applies to Lawyers?
Insurance companies classify different occupations based on their risk of causing a disability. For example, construction workers have a high risk and therefore are in a higher class (higher premiums). In contrast, attorneys and lawyers are in the lowest risk group, allowing higher coverage amounts at lower rates.
Should You Get Disability Insurance as an Attorney?
Disability insurance is vital for Attorneys and lawyers, especially if your family relies on your income.
The right policy will protect you no matter what life throws your way, ensuring you and your family can stay financially afloat, even if you can’t work.
Take a look at your financial situation, needs, and goals to determine what type of disability insurance is right for you!