As an accountant, you’re likely familiar with long term disability insurance (or disability income insurance, as it’s sometimes called). You may even have counseled clients in high-risk occupations about how important it is to have income protection if an accident or illness keeps them from working.
But what about you? Maybe it’s time to think more about your own need for income protection. Perhaps you already have employer or association coverage, but should you supplement it with an individual policy? The rationale may be stronger than you realize.
A ‘low-risk’ job doesn’t mean low risk for disability
According to the Social Security Administration (SSA), roughly one in four 20-year-olds will be out of work for at least a year because of a disabling condition before reaching normal retirement age.1 That’s one quarter of all 20-year-olds, not just those in high-risk occupations.
Why? In part because statistics show that accidents are not the cause of most disability. The fact is, accidental injuries only account for about 9% to 12% of long-term disability insurance claims; most claims are the result of illnesses, such as cancer, heart disease, and mental health issues.2 More specifically, musculoskeletal disorders (such as back and joint pain) are the leading cause of long-term disability claims (26% to 33%); other top causes include cancer (15%), injury/fractures (11% to 12%), mental health issues (9%), and cardiovascular issues (8%). When it comes to more temporary short-term disability claims, pregnancy (22%) and musculoskeletal issues (18%) top the list.3
Bottom line, there’s no reason to assume that a ‘desk-based’ profession insulates you from disability or the resulting financial fallout. When you consider the many reasons that could prevent you from fulfilling the cognitive demands of accounting (regulatory interpretation, financial analysis, client advisory), you may actually have an above-average need for disability insurance coverage.
Reasons why employer and association coverage might not be enough
If you’re working for an accounting firm or are self-employed, you may already have some group disability insurance coverage through your employer or an industry association. These plans can provide a valuable layer of protection that’s easy to get with simplified underwriting and low or subsidized premiums. The question is, if your income is compromised due to a disability, will that group plan be enough? A quick mental calculation is all it takes to see that you may need additional benefits to meet financial obligations if you can’t work for a year or more.
Group plans usually cover about 60% of base salary and are subject to a $5,000 to $10,000 benefit cap.4 For a partner or other high-earning accounting professional, this can lead to a serious coverage gap where benefits paid don’t come close to replacing monthly income lost. For example, if a partner earns $300,000 annually (approximately $210,000 after taxes), even a $10,000 pre-tax monthly benefit will leave them well short of their pre-disability take-home pay. There are also a number of other drawbacks that can impact any accounting professional regardless of salary level:
Benefit payments from an employer plan are generally taxable.
Employer-paid coverage is usually not portable, which means you could lose it if you leave or change jobs.
Association plans can have stringent benefit period limitations.
Association plans may have eligibility limitations that require working a minimum number of hours per week.5
Most importantly, employer and association plans may not offer the same own-occupation protections as individually underwritten policies.
Individual disability insurance can provide more comprehensive protection for your finances
Getting an individual disability insurance (IDI) policy to supplement your group coverage — or as a standalone policy — can provide a number of advantages. While many employer group plans aren’t portable, purchasing coverage as an individual gives you protection that stays with you even if you change jobs. Unlike employer-paid coverage, which usually yields taxable benefits, IDI benefits are usually income tax-free because premiums are paid with after-tax dollars. The policy can also be tailored to your needs, with benefits that typically pay between 50% to 70% of income based on actual earnings, not just base salary.
The definition of disability is a key differentiator
Every policy has a specific definition of what it means to be disabled in order to qualify for total disability benefits. Short-term disability policies tend to have a simple definition: if you are unable to perform the “material and substantial” (i.e., core and essential) duties of your present occupation due to a covered illness or injury, you generally qualify for benefits.
However, longer-lasting disabilities present another possibility: An injury or illness could make you unable to perform the substantial and material duties of your own occupation, but might not prevent you from practicing any occupation. Some long-term disability policies use an own-occupation definition of disability, while others use an any-occupation definition. Workers who don’t rely on highly specialized training to generate income can be well-served by a policy with an any-occupation definition of disability, because even if their disability limits them to a desk job, they may still be able to find work with similar pay.
However, policies for highly compensated professionals with specialized training need to be more comprehensive. One obvious example: A surgeon who loses part of a finger in a car accident might be unable to perform surgery — and generate the level of income needed to support their lifestyle. But all sorts of other issues can impact a professional’s earning potential. Consider: An accountant whose vocal cords are damaged by throat cancer might still be able to perform a detailed variance analysis or external audit, but have to give up or scale back the client-facing roles most valued by their firm.
In both situations — and countless others — a professional’s earning potential can be severely impacted by disabilities that prevent them from performing the tasks they do best, even if they are still qualified and physically able to do other work.
Long-term individual disability insurance with an own-occupation definition of disability — or, for short, own-occupation disability insurance — pays a benefit if you lose the ability to perform your regular occupation. However, this more comprehensive level of financial protection comes at a cost. For that reason, insurance companies offer different forms of own-occupation coverage to tailor benefits more cost-effectively to your needs. For example, Guardian offers a number of options under their own-occupation definition of disability6:
1. True own-occupation
If you can’t work in your regular occupation but are willing and able to work in some other capacity, this definition means you can get your full benefit payment even while holding another kind of job. For those in a medical specialty, it is crucial to have insurance that accurately reflects the specialized nature of their careers. If the surgeon in the above scenario had disability insurance for physicians with this definition, he or she could take a teaching or consulting job and still receive replacement income for the entire benefit period.7
2. Modified own-occupation
This definition pays a full benefit if you can’t work in your regular occupation and you are not gainfully employed in another capacity. Accordingly, the accountant in the above scenario would receive benefits as long as he or she wasn’t earning income, but if he or she decided to start working as a legal consultant, income benefits would stop.
3. Two-year true own-occupation
This definition of disability offers a two-year period of true own-occupation. If you’re still disabled after two years, your coverage converts to a modified own-occupation definition for the remainder of your benefit period.
4. Two-year modified own-occupation
Another option is to simply have a modified own-occupation definition for the first two years. If you’re still disabled after two years, your coverage converts to an any-occupation definition, meaning that due to sickness or injury, you’re unable to work in any occupation.
When should you get individual disability insurance?
Whether you’re just beginning your accounting career, you’re a seasoned sole practitioner, or you’ve ascended to the top of an accounting firm, now is generally the best time to get IDI. Here’s why:
Early career (staff/senior): If your employer-paid or association disability insurance provides adequate coverage relative to your income, you may not need the extra protection of an individual policy just yet. However, as your career develops, you’ll probably need it at some point in the future, and now may be the best possible time to act. Why? As with life insurance, it’s best to lock in coverage when you’re young and healthy because that's when disability insurance costs are lowest. But look to get an IDI policy with a future purchase option or benefit increase rider.8 These features let you increase your coverage as your income grows — without additional medical underwriting — so you can scale your protection to match future promotions, bonuses, and career jumps, even if your health changes later on.
Mid-career (manager/partner track): After you’ve been practicing for several years, your income will probably be too high to be adequately protected by employer-paid or association plans, most of which are subject to benefit caps. Plus, at this career stage, own-occupation protection becomes more crucial as you’ve developed specialized expertise that commands higher compensation. As mentioned above, many association plans don’t offer the same own-occupation protections as individual policies.
Late career (practice owner/sole practitioner): At this career stage, group or association coverage may be unavailable or totally incapable of protecting your actual income, so individual disability insurance becomes the primary income protection layer. In addition to securing individual coverage, practice owners may also want to explore business overhead expense insurance (BOE), which helps pay a business’ fixed operating costs if the owner becomes disabled and can’t work. BOE benefits are meant to keep the business running while the owner recovers, not to replace the owner’s personal income.
What to look for in an individual disability policy
Is the coverage true own-occupation or transitional?
Accounting professionals should have own-occupation coverage, but policies can have many variations on this definition in addition to those outlined above. For example, true own- occupation means you can receive benefits if you can’t work as an accountant but choose to work in a different field, and your benefit is not reduced just because you earn income elsewhere. Transitional own-occupation also pays if you can’t work as an accountant, but the benefit can be reduced if your new job income plus the disability benefit exceeds your pre-disability earnings.
How long is the benefit period?
A disability insurance benefit period is the maximum length of time the policy will pay benefits after you become disabled. This could be 2, 5, or 10 years, or benefits could last until retirement age, but such a lengthy benefit period might not be cost-effective: The average duration of a long-term disability is 2.5 years.9
How long is the elimination (waiting) period?
The elimination period is the waiting period between the date your disability starts and the date your disability insurance begins paying. For long-term disability, a common elimination period is 90 days, although many group policies use 90 or 180 days. Generally, a longer elimination period usually means a lower premium, and a shorter elimination period means a higher premium.
Is the policy noncancellable or guaranteed renewable?
Noncancelable means the insurer cannot cancel your policy, raise your premium, or reduce your benefits as long as you pay on time. Guaranteed renewable means the insurer must renew the policy as long as you keep paying, but may still be able to raise premiums, usually on a class-wide basis rather than just for you.
Does the policy include residual/partial disability coverage?
Residual/partial disability coverage pays benefits when you’re still able to work, but not at full capacity because of an illness or injury.
Can you add a benefit increase rider?
An increase in benefits allows you to increase your coverage in the future without new medical underwriting.
Guardian can help
You should always consult with a knowledgeable financial advisor who can help ensure that you secure the right coverage — with the right policy design and disability benefits — for an accountant at your career stage and income level. If you have someone you trust, ask them about disability insurance and how it fits into your plans. Otherwise, Guardian can connect you with a financial advisor to help you find the coverage and solutions you need.
Frequently asked questions about disability insurance for accountants
An accountant should usually have professional liability insurance first, then add general liability, cyber liability, and workers’ compensation if they have employees.10 Accountants should also consider individual disability insurance to protect their income if they experience a disability that compromises their ability to work and earn income.
Yes, people can get individual disability insurance policies on their own, separate from an employer or association plan. It is typically purchased to supplement existing coverage or if one has no other coverage. Unlike employer-sponsored disability insurance, individual coverage usually stays with you even if you change jobs.11
A common formula for group disability insurance plans is about 60% of your pre‑disability income, up to a plan maximum.
So, if you earn $100,000 a year (about $8,333 per month in gross income), and your long term disability (LTD) plan pays 60%, your gross LTD benefit would typically be around $5,000 per month before any offsets or taxes, subject to the policy’s monthly maximum and integration with benefits like Social Security disability (SSDI).12,13
Yes, Parkinson’s can qualify for long-term disability, but the diagnosis alone is usually not enough. Most disability insurance companies require proof that the symptoms prevent you from performing the duties of your job, and insurers often look for medical evidence showing functional limits such as tremors, balance problems, slowness, rigidity, fatigue, or cognitive issues.14