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What would happen to your business and your family if you suddenly had to take six months off because of a serious illness or injury?
To prepare for such situations, owner-operators can choose from two, and sometimes three, basic types of income replacement insurance: disability, occupational accident and workers’ compensation. Their costs and coverage vary widely. The main factors are how long you can wait to receive benefits, how large the benefits are, and how long you continue to receive benefits. Personal factors, too, will influence the premium – income, age, health status, bad habits, gender, leased or independent status, and type of loads you haul.
Ted Krzycki, a dry-van owner-operator leased to Crete Carriers, has been glad to have the short-term disability insurance that his company offers. Krzycki had an accident while trimming trees and broke his left hand. “I didn’t think a hand could give you so much trouble,” he says. “Last June I had a stint put in an artery in my heart, and I wasn’t even out for a month, but this broken hand has been giving me a fit.”
By paying a monthly premium of about $20, Krzycki, 60, was eligible to receive the maximum benefits of $500 a week for up to six months following a 30-day “elimination period” – the waiting period before benefits begin.
“Since I wasn’t out for more than a month in June with the heart thing, I didn’t receive any money, and it put me behind by a good couple of months,” Krzycki says.
Even though Krzycki, who has been an owner-operator for 16 years, was prepared with savings accounts, he says the disability coverage definitely helps out. “I never thought I would fall off a ladder,” he says.
Most insurance plans replace 50 percent to 70 percent of your income. Payout periods are as short as six months and as long as the rest of your life.
Maximum weekly payouts are typically $400 to $600, with elimination periods ranging from seven days to one year.
Social Security’s elimination period is six months, and that’s only for those deemed eligible for benefits. Social Security denies about half of the claims submitted, in part due to its strict definition of disability. To qualify, you must be unable to work at any job, and your disability must be expected to last a year or end in your death.
Much better coverage is available through disability, occupational accident and workers’ compensation policies. Here is what they offer.
Disability insurance premiums vary widely depending on the length of the elimination period, the length of the benefit period and the scope of disabilities covered.
Make sure you understand a plan’s definition of disability. Some policies may not pay benefits if you can work at an occupation other than trucking, or they may pay partial benefits if you can do some but not all the duties of your own occupation. The key terms are “own occupation” and “any occupation.” And make sure your policy covers both injuries and illnesses that interrupt your job.
Short-term disability insurance is designed to pay benefits sooner, and for a shorter period, than long-term disability. Most short-term benefits last a year or two; long-term benefits can last until you turn 65, or even until death.
Perry Wiseman, with Truckers Accounting Service in Omaha, Neb., says that if you can afford disability, get it. “You’re probably going to run into a situation where you are going to need it,” he says. “More and more states and companies are requiring it.”
Wiseman says he sees truckers who are running on such thin margins that they can’t save enough to match what the payout would be from disability insurance. “Premiums for this type of insurance can be up to $150 a month, but it would take a lot of $150-a-month,” he notes, but that can be a small price to pay for even a short period of disability insurance payouts.
Most Crete drivers enroll in the company’s short-term disability plan, says Richard Snyder, director of recruiting. Claimants who aren’t eligible for the full payout still receive a percentage of their earned incomes from the past six months. “But there is a one-year waiting period for new drivers before they can sign up for the insurance,” he says.
E. Gregory Jachelski, president of the Financial Solutions Group in Mount Airy, Md., says the average payout for disability insurance runs about 60 percent of your income. The average cost – depending on age – is about 3 percent of your income. “You can get a policy with a 30-day, 60-day, 90-day or 180-day wait. We can cover you for six months, two years, five years, 10 years, or until you turn 65,” Jachelski says.
John Clark with Mutual of Omaha says the company gives a 15 percent discount on disability coverage to self-employed individuals if they meet some basic criteria because “they’re much more likely to go back to work than an employee.” In addition to individual disability coverage, the company offers the self-employed a business overhead expense insurance that would pay benefits to keep a business running. “The elimination periods are similar, but there are only two options for benefits – 12 or 18 months. By then you should know whether you’ll be able to get back in or if you’ll have to sell out,” Clark says.
The Owner-Operator Independent Drivers Association offers voluntary short-term disability insurance through American Zurich. “There are two options: 30-day waiting period or 60-day waiting period,” says Brenda Reynolds, OOIDA’s medical benefits supervisor. “And there’s a $25,000 accidental death benefit.” The maximum weekly benefit is $400, with a $100 per week minimum, for up to 52 weeks. New members can sign up for disability during the first 60 days of membership and be guaranteed acceptance. “However, if someone waits, they’re subject to underwriting, except for once a year, from Jan. 1 through the end of February,” Reynolds says.
The Financial Solutions Group offers an innovative Surrender Value Rider for its disability plans. It returns all of your premiums at age 65, less any claims, if you don’t use all of your coverage.
Like health insurance, disability usually won’t cover you for claims related to pre-existing conditions. You’ll probably have to answer medical questions and maybe get a physical examination. If you’re turned down for full coverage, you may be able to purchase a restricted policy or to pay higher premiums for some level of coverage.
When you’ve paid the premiums yourself, disability benefits are not taxable income; on the other hand, the premiums are not tax-deductible.
Occupational accident insurance covers only injuries or illnesses related to work. Most policies also provide limited coverage of doctor and hospital bills in addition to paying a percentage of your income.
U.S. Specialty Insurance Co. in Northbrook, Ill., specializes in occupational accident coverage for owner-operators. “Because they’re independent, in most states they’re not required to carry workers’ comp,” says spokesperson Chris Manchester. “Because of the frequency and the severity of occupational injuries, truckers in general and owner-operators in particular can be put in financial straits if they don’t have some type of income replacement insurance.”
Manchester says benefits can range from 60 percent to 75 percent of your income. Benefits can be paid for one or two years or, if someone is totally disabled, until they turn 65. Premiums can depend on what types of haul you do and the type of trailer you pull.
And then there’s contingent coverage, which “most motor carriers look for in conjunction with an occupational accident policy,” Manchester says. “It protects motor carriers in the event that an owner-operator files for employee status against a carrier after a severe work-related injury or illness.”
Jeania Grimsley with Cary Mormino & Associates Trucking Insurance in Abernathy, Texas, says most of its occupational accident policies have a seven-day waiting period and pay benefits for two years. A physical is not required, but there are some basic medical questions to answer. Premiums range from $125 a month to $145; the maximum weekly benefit is $500.
States’ workers’ compensation programs vary considerably, as do the costs and benefits. Owner-operators and other sole proprietors are unable to get workers’ comp in some states. When they can get it, the cost is usually so high that owner-operators do not participate.
One reason for the high cost is that workers’ comp pays for all medical expenses related to a claim. Most workers’ comp policies also pay for occupational retraining while the policyholder gets weekly benefits. Some provide partial benefits for partial disabilities.
Wayne Conklin, an owner-operator from Carthage, Mo., who is leased to U.S. Xpress, pays about $70 a month for workers’ comp because the company requires it. If he gets an illness or injury that isn’t work-related, he says, “Hopefully my wife would make enough to cover the bills.” He’d rather have the backup of disability insurance to cover situations that are not work-related, but, “I just can’t afford it,” Conklin says.
Owner-operator Frank Alderson of Leesville, La., says he pays about $500 a month for workers’ comp premiums to cover the driver of his other truck and a dispatcher, but that he is not included in the coverage. If injury or illness knocked him out of driving, “I’d just hire another driver,” Alderson says.
Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association, says that income replacement coverage has the same dilemma as any type of insurance. “You pay for it and pay for it and hope you never have to use it,” he says. “But the reality is that if you take the risk of not having it, sometimes you lose, and it could be really, really serious.”