Income insurance: Staying afloat when the settlements stop, Part 1

Updated Jan 10, 2013

Money Jar 2You know how hard it is to stretch settlement checks to cover all business and personal expenses each month. Now imagine you were down for months due to an injury or illness. How long could you make it before you were in a severe financial crisis?

The probability of an income-interrupting event is more likely than you might think. Three out of every 10 Americans between ages 35 and 65 will become disabled for more than 90 days at some point in their lives, according to the American Council of Life Insurers. One in seven will become disabled for more than five years.

The probability of an income-interrupting event is more likely than you might think. Three out of every 10 Americans between ages 35 and 65 will become disabled for more than 90 days at some point in their lives.

“An owner-operator working without adequate coverage who experiences an on-the-job injury can be exposed to various hardships, including loss of income if unable to work,” says Mary Ford, divisional senior vice president of the Great American Insurance Group’s Trucking Division.

Any given plan will pay a percentage of your income with a flat rate maximum and only for a fixed period. The typical payout is 50 to 60 percent with a cap, though some may run up to 70 percent. Most policies will stay in effect as long as you stay current on your premiums, even if chronic health problems continue after your initial claim.

“In some cases, an owner-operator’s spouse may have a family medical plan through an employer,” Ford says. “Work-related injuries for the owner-operator, however, may be declined by the plan provider because most work-related injuries typically are covered by a workers’ compensation policy or an alternative product,” such as an occupational accident policy.

Click here to read Part 2 of this series, which covers disability insurance policies for truckers.

Occ/acc and disability policies, and in certain circumstances Social Security, are the most common income replacements available to owner-operators.

We’ll start out by taking a look at occ/acc insurance and follow up throughout the week with details on disability insurance and Social Security  Disability Insurance.

Occupational accident

Usually the most inexpensive coverage for owner-operators is an occ/acc policy. It provides benefits to the policyholder in the case of a work-related injury or illness, unlike a traditional accident policy that pays out even if the accident is not work-related.

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Occ/acc benefits are not based on income, but rather a menu that outlines the payment amounts for minor to major job-related injuries or illnesses. Some carry options or riders depending on what the policyholder wants.

“Trucking puts a lot of strain on owner-operators with the cost of equipment and fuel,” says Carl Della Vella, chief executive officer of Association Benefits of America, an insurance broker in Scottsdale, Ariz. “Most owner-operators don’t even think about workers’ comp or occupational-accident until they need it to get a job with a fleet.”

Most fleets require leased owner-operators to obtain either workers’ comp or occ/acc coverage, and occ/acc is the most common income replacement insurance. For this reason, many owner-operators don’t view occ/acc as elective coverage.

One thing that makes occ/acc the top choice is it’s usually cheaper than workers’ comp. Also, in most states, workers’ comp won’t pay out to self-employed workers. This makes occ/acc an easy choice if your state’s workers’ comp regulations have an opt-out provision.

“Owner-operators who are just starting out usually want to know what the bare minimum is they need to get on the road,” says Peter Berg, an account manager with TrueNorth Companies, which is affiliated with the nonprofit Truckers Service Association.

Great American’s Ford advises taking a good look at the insurance company itself before deciding on a particular policy. She recommends looking for an insurance carrier that has favorable financial ratings from a rating agency, such as A.M. Best. Owner-operators also should consider the insurance carrier’s expertise in underwriting their niche market segment and its ability to service claims adequately, Ford says