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Construction Business Tips: What You Should Know About Disability Insurance

Construction Business Tips: What You Should Know About Disability Insurance

Most construction professionals don’t work behind a desk.

You’re on job sites operating heavy equipment, erecting scaffolding, removing debris, unloading materials, and constructing buildings and infrastructure from the ground up.

You spend long hours on your feet. You put tremendous strain on joints and muscles. You must be strong, healthy, and fit to do the job.

Can you count on your body to stay strong enough to handle this type of labor?

If not, how will you earn a living? What if you can’t work at all or need to take a lower-paying job? How would the loss of a paycheck affect your ability to pay your mortgage, your utilities, and the grocery bill for you and your family?

What if you didn’t have to worry about any of that? With individual disability insurance coverage tailored to your needs, it’s possible.

What is disability insurance?

Disability insurance is protection against lost income. It provides a paid benefit to the insured if an injury or illness limits or prevents them from working.

Disability insurance is different from workers’ compensation. This type of coverage only pays a benefit if you’re injured on the job. Disability insurance, on the other hand, covers most types of ailments that affect your ability to work.

Disability insurance also provides better coverage than Social Security Disability Insurance (SSDI). Nearly two-thirds of applicants are denied coverage for SSDI.

Also, SSDI only pays, on average, a monthly benefit of just over $1,200. This amounts to less than $15,000 a year, or about 35 percent of what the average construction worker earns annually.

Disability insurance benefits are based on your annual income. The policy is designed to replace a larger portion of your salary.

What do construction professionals have to lose?

According to the Bureau of Labor Statistics (BLS), construction workers made an average of $40,350 in 2018.

Salaries can vary by location, the type of work performed, and the industry.

Utility system construction work pays an average of $41,880 in the U.S. Nonresidential construction wages average $43,330. Highway, street and bridge construction pays about $46,000 on average.

Construction work for the railroad, hospital, and electric generation industries all average annual salaries above $50,000

The highest average salaries for construction laborers by state are:

  • Illinois: $59,960
  • Hawaii: $58,770
  • New Jersey: $53,540
  • Massachusetts: $52,780
  • Minnesota: $52,150

The highest paying metropolitan areas, according to BLS, are:

  • Chicago, Illinois: $62,870
  • Kahului, Hawaii: $60,570
  • Napa, California: $59,620
  • Honolulu, Hawaii: $59,610
  • Minneapolis-St. Paul, Minnesota: $58,480

If you’re a construction supervisor, you made an average of $69,200, according to the latest BLS data. That includes an average of $73,000 in nonresidential construction, $70,000 in road and bridge construction, and $69,000 in utility systems.

The top-paying states for construction supervisors are:

  • Alaska: $99,690
  • New York: $84,930
  • Illinois: $82,160
  • Massachusetts: $81,620
  • California: $81,370

The highest-paying metropolitan areas are:

  • San Jose, California: $100,180
  • San Francisco, California: $99,740
  • Anchorage, Alaska: $95,580
  • Fairbanks, Alaska: $95,150
  • Salem, Massachusetts: $94,030

No matter where you fall on the earnings spectrum, your income — and the ability to keep earning it — matters.

Understanding the importance of how disability is defined

It’s important to realize that even with disability insurance, you may be at risk of losing significant income.

Disability policies have different ways of defining “disabled.” The definition determines how much, and even if, you collect in benefits following an injury or illness.

A policy’s definition of disability is based on your capacity to work. In some cases, you may not be able to work in construction because of a disability, but you could work as a property manager, a driver, or in retail.

To collect on a claim, you must meet the policy’s definition of disability. This can vary greatly by company and policy. The broader the definition, the more insurance will cost.

Policies will mostly define disability in one of four ways:

  • Any occupation
  • Own occupation
  • Modified own occupation
  • Transitional own occupation

Because you may not earn as much in other professions as you do in construction, you should consider an own-occupation policy.

This is a policy that protects your ability to work in your given profession. You will be covered if a disability prevents or limits you from working the job you had before your event. Even if you’re able to work in retail, property management or another profession, you are still eligible for benefits if you’re earning less money.

You may also collect on an own-occupation policy if you have to work less hours because of a disability, or if there are some tasks of your construction job you can’t perform.

More reasons construction professionals need disability insurance

Based on a number of estimates, the average American worker has a 25 percent to 30 percent chance of suffering a temporary disability that prevents them from working at some point in their careers.

Additional data shows about one in seven people between the ages of 35 and 65 can expect to become disabled for five years or longer.

Construction workers are more at risk of being unable to work in their field because of a disability. This is largely due to the physical nature of their work.

As stated above, workers compensation only covers a person injured on the job. On average, more than 95 percent of disability claims are not work-related. While there are probably more work-related claims in construction, there are still a number of ways to become disabled outside of work.

In fact, only 10 percent of disabilities that cause missed work are due to accidents. The remaining 90 percent are due to chronic injuries or illnesses. The leading causes of disability include musculoskeletal disorders, cancer, injuries, mental health issues, and circulatory illnesses.

It’s doubtful the typical construction laborer or contractor could continue working while recovering from a heart attack or undergoing chemotherapy to treat cancer. But you don’t have to worry about that with disability insurance.

Also keep in mind that if you are a business owner or independent contractor, you don’t have workers’ compensation even if you’re injured while working. Disability insurance is the only way to replace most of your income in the event you can’t work because of an injury or illness.

Unless you have money sources besides a paycheck, you may struggle to pay your bills and afford basic living expenses during your recovery from disability.

Only about 34 percent of households have enough cash on hand to last three months or more without income.

Disabilities often last longer than a few months. The average length of a disability for a typical 30-year-old is 2.5 years.

What determines the cost of disability insurance?

Disability insurance is priced much like other types of insurance. Your disability insurance rates are based on the risk of you filing a claim, the amount of that claim, and how long benefits may last.

Factors used to determine risk include:

  • Your age and health. The younger and healthier you are, the less you will pay.
  • Your income, because it’s designed to replace a percentage of your income.
  • Where you live.
  • The benefits and features of your disability insurance policy.
  • Your specific occupation.

Disability insurance companies group jobs into specific occupational classes. These classes take into account the hazards of the job and the difficulty in returning to work following a disability.

For that reason, disability insurance companies consider construction laborers riskier to insure than construction supervisors, who are typically riskier to insure than construction company executives.

Another factor is the claim experience associated with certain professions.

Insurance companies generally classify occupations on a scale of 1 to 5 or 6. Typically, the higher the numerical value of the classification the lower the rate available from the insurance company.

Construction professionals who have manual labor responsibilities are generally in the lowest classifications, meaning they will pay higher rates. Contractors, supervisors, and executives with minimal to no manual duties can be classified between a 2 and a 4, depending on the insurer.

Some insurers will not insure construction professionals in certain industries or with certain types of jobs. These include those working on bridges, dams, and tunnels, or those who operate air hammers or work around asbestos.

What does disability insurance cost for construction workers?

Here are a few scenarios that provide estimated costs for coverage based on the above factors.

  • A 35-year-old construction laborer in Kansas City making $40,000 a year can get a $900 monthly benefit for up to five years for $26 a month. A $1,700 monthly benefit would cost about $45 a month, and a $2,480 benefit would cost $69. A 45-year-old would pay $38, $67, and $107 for the same coverage.
  • A 50-year-old supervisor or independent contractor in Boston, also a tobacco user, making $80,000 a year can get a $1,500 monthly benefit for up to five years for $71 a month. A $2,900 monthly benefit would cost about $154 a month, and a $4,250 monthly benefit would cost about $247. The same scenario where the insured is a business owner or executive would likely pay closer to $51, $110, or $176 for the same benefit.
  • A 50-year-old female executive in the construction industry earning $140,000 in Denver could get a $2,200 monthly benefit for up to 10 years for $89 a month. It would cost about $215 for a $4,400 benefit and $342 for a $6,600 benefit. The same rates for a male executive would be $65, $158, and $250.

But these are just estimates.

You can get an individual disability insurance quote online and even apply for a policy on-the-spot. Given the nature of your work, it very well may be the easiest thing you use today. Plus, you can lay the foundation for financial stability for an unknown future.

This is a guest post from Breeze.

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