Nobody likes to think about the possibility of becoming disabled. This is especially true for young people starting their professional careers. Yet the Social Security Administration found that more than 25% of 20-year-olds will suffer a disability before they retire.
That’s a startling statistic and even more so when you consider how many young people are dealing with loads of student loan debt. Here’s what you need to know to find the best disability insurance for you.
Student loan borrowers: why you might need disability insurance
The first few years after college graduation can be tough financially. No matter your career choice, it’s the perfect storm of low income and high bills as you find career stability. Add a multi-month (or multi-year) span of unemployment due to an injury or illness into the mix, and the results can be devastating.
Although forbearance or deferment could be options during income droughts, interest continues to accrue, which costs you more money.
Student loans are also one of the few debts that are difficult to discharge in bankruptcy. But with disability insurance, you can replace up to 60% of your gross income in the event you’re disabled from an accident or illness.
If you’re dealing with loads of student loan debt while living on a tight budget, getting disability insurance could be a smart move.
Best disability insurance when you have student loans
Disability and student loans can definitely be a bad combination for your finances. That’s why some insurance companies now offer something called a “student loan rider.”
Disability insurance student loan riders
Student loan riders allow you to access more funds to help you make your student loan payments while you’re disabled. Here are a few features of disability insurance student loan riders to know:
- Student loan riders usually pay anywhere from a few hundred dollars to a cap of around $2,000 to $2,500 a month.
- Student loan rider payments are typically made straight to the lender, not to the insured.
- Disability insurance student loan riders are usually very inexpensive. Policies often start at $5 a month.
If you plan to go for student loan forgiveness through an income driven repayment plan, a disability rider is unnecessary! If your income falls, your payment will fall. Disability riders are only very important for borrowers who refinance their loans and are therefore committed to large monthly payments.
Because these student loan riders are usually cheap when they’re offered, get one if you plan to pay off your loans in full.
One option to get quotes from companies that offer this rider (and those that don’t) is to fill out the form below. Our partner agents have decades of experience dealing in exclusively true own occupation disability insurance and can help evaluate options with you.
What insurance coverage do you want a quote for? (check all that apply)
What is Your Occupation Status Currently?
Program Sponsor / Institution
Program End Date
Did you finish training or school in the last 6 months?
Are you covered by group disability insurance through your employer?
Do you have an existing individual disability insurance policy?
Have you had any recent surgery or hospitalizations?
Do you take any medication?
Do you have any medical conditions?
Are you a smoker?
Date of Birth
State of residency
Communication preference with SLP Insurance
Any additional questions or comments?
Quick tip: you’ll get the cheapest premiums if you choose to wait at least 90 days after you become disabled to begin receiving benefits.
Once you’ve worked with an agent to get quotes, the insurance company will typically line up a medical exam for you to pass before the policy can go into effect.
Total and Permanent Disability Discharge (TPD): What to know
Federal student loan borrowers may assume the Total and Permanent Disability Discharge (TPD) provision will cover them if they ever were to become disabled.
But what’s important to understand is that only “permanently” disabled people qualify. For most people, that means you’ll need a physician’s note stating your disability can be expected to last for at least 60 months.
Even if you’re dealing with an illness or injury that will keep you out of work for multiple years (anything less than five), this wouldn’t qualify for disability discharge according to the government’s strict standards.
Furthermore, TPD only discharges the following loans:
- William D. Ford Federal Direct Loan (Direct Loan)
- Federal Family Education Loan (FFEL)
- Federal Perkins Loan Program loans
- TEACH Grant service obligations
For these reasons, federal student loan borrowers may want to consider disability insurance.
When it comes to making sure you have enough disability insurance, student loans can muddy the waters a bit. Are you unsure how much disability insurance you need or if you should add a student loan rider?
Use the form below to get an insurance quote.