Most of the world runs on electricity. That makes your job as an electrician extremely important.
Electrical work can be a demanding and hazardous vocation. It's also rewarding, both in the satisfaction of bringing or restoring power to a building, and in the monetary rewards of working in an in-demand career.
As an electrician, you understand the importance of your physical health to do your job. You need the use of your eyes and hands. It’s important to also have a sharp mind to diagnose problems and interpret wiring diagrams. The job often requires hours of standing or kneeling. Lose these abilities and you lose some or all of your ability to make a living.
If something happens to you on the job, workers' compensation can help. But not all injuries and illnesses happen as the result of work.
What happens if you fall off a ladder while cleaning your gutters and break your hip? What would you do for income if you become seriously injured in a car accident, or need extended time off while being treated for cancer or heart disease? None of these ailments are covered by workers' compensation.
You’re at less risk to lose your income in these circumstances if you invest in disability insurance. Disability insurance is designed to replace a major portion of your income if you are unable to work due to injury or illness.
Without disability insurance, you could lose a significant amount of income and all that your income supports if you’re in a bad accident, lose your vision, or suffer an illness that affects your ability to work in your chosen trade. Even if the disability is temporary, you could fall behind on your mortgage or car payments, rack up more debt, and be forced to sell valuable items or tap into retirement accounts for needed cash.
Short-term disability insurance is usually provided by employers and covers individuals, on average, for about six months. You will typically be reimbursed for about 60 percent of your lost wages due to disability.
Long-term disability insurance policies are designed to protect people from illness or injury that keep them out of work for an extended period. Benefits may last from five to 10 years, and some will pay up until the insured reaches age 65.
There are two main sources for where to get disability insurance: You can buy a policy that’s part of a large group plan, either through your employer, labor union or trade association; and/or purchase your own individual policy.
Social Security won’t be much help either. Social Security Disability Insurance (SSDI) has a strict definition of disability. Most applications are initially denied.
To qualify, you must be significantly limited in your ability to do basic work such as lifting, standing, walking, sitting, and remembering. In addition, the condition must be severe enough that it’s expected to last at least 12 months and/or result in death. Otherwise, Social Security will not consider you disabled.
If you manage you get through the application process and receive a favorable benefits ruling, don’t expect a large check each month. According to the Social Security Administration, the average monthly disability paid by SSDI was $1,234 at the beginning of 2019. That’s a little under $15,000 a year.
According to the U.S. Bureau of Labor Statistics, the median annual salary for electricians in 2020 was $56,900. That amount is expected to rise as the demand for electricians increases by an estimated 8 percent over the next decade, at a time when there are more professionals retiring from the field than there are entering it.
Here are examples of what electricians might pay for disability insurance:
- A 35-year-old female electrician working in Kansas City, Missouri, and earning $45,000 a year could get a $1,000 monthly benefit for $37 a month, a $1,900 monthly benefit for $68 a month, or a $2,750 monthly benefit for $108 a month. These rates are for a 10-year benefit period and a 90-day waiting period.
- A 40-year-old male journeyman electrician working in Pittsburgh, Pennsylvania, and earning $60,000 a year could get a $1,200 monthly benefit for $40 a month, a $2,300 monthly benefit for $76 a month, or a $3,400 monthly benefit for $121 a month. These rates are for a 5-year benefit period and a 90-day waiting period.
- A 45-year-old male journeyman electrician who owns a business in Jacksonville, Florida, and earning $85,000 a year could get a $1,500 monthly benefit for $62 a month, a $3,000 monthly benefit for $136 a month, and a $4,430 monthly benefit for $214 a month. These rates are for a 5-year benefit period and a 90-day waiting period.
- A 50-year-old male electrician working in Boise, Idaho, and earning $52,000 a year could get a $1,100 monthly benefit for $47 a month, a $2,100 monthly benefit for $89 a month, or a $3,130 monthly benefit for $150 a month. These rates are for a 10-year benefit period and a 90-day waiting period.
What determines how much you’ll pay?
Insurance companies set your monthly premium on the following factors:
- Your age and health. The younger and healthier you are, the less you will pay.
- Your income. Disability insurance is designed to replace a percentage of your income if an injury or illness limits your ability to work as an attorney.
- Where you live. Some geographic locations have higher rates than others.
- The benefits and features of your disability insurance policy.
Another factor that strongly influences what you pay for disability insurance is your job.
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. 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.
Insurers tend to place electricians in the middle of their rating classes. Those with six rating classes will place electricians in their third class. Those with four classes classify electricians as a two.
Insurers consider most electrical workers as skilled manual workers who have no unusual accident hazard.
Insurance companies may classify electricians differently based on whether they are journeymen, masters, or another type of electrician.
One insurer, for example, classified journeymen and masters electricians in their 2A class, while other electricians were rated 1A.
Another insurer with 6 rating classes puts residential and commercial electricians in its 3rd class, field supervisors and estimators in its 2nd class, and meter installers and inspectors in its 1st class.
As you shop for disability insurance, here are a few considerations.
The most important provision you need to have included in your policy is that a disability is defined as one that prevents the insured from working in his or her “own-occupation.”
What constitutes disability depends on the policy. Some are known as “own-occupation,” and will pay benefits if an injury prevents you from working at your normal job, but allows you to do other types of work.
For example, an electrician who develops severe arthritis may not be able to work in that field. But an insurance company could argue that he or she could, perhaps, find work in another lower-paying field. Therefore, he or she is not technically disabled.
An “own-occupation” policy would pay the electrician full disability benefits regardless because they would no longer be able to perform the duties of their chosen profession.
Another provision you should consider is residual disability. This feature may provide benefits if you can still work following a disability but are not considered totally disabled. It is designed to protect you against partial income loss. It comes into play if you are able to perform some, but not all, of the material duties of your occupation or if you are unable to work for a set percentage of time. Benefits are typically calculated as a percentage of your loss of earnings or what you would receive if you were unable to work.
Finally, if you own an electrical contracting business, your disability coverage should also include business overhead expense (BOE) insurance.
Whereas regular disability insurance covers individual income, a BOE policy will help cover your monthly business expenses if an injury or illness impacts your ability to work.
BOE policies vary but you can typically get one that pays a maximum monthly benefit between $15,000 and $25,000. If you obtain BOE that is bundled with your personal disability policy, the maximum benefit may be a factor of that benefit amount; for example, the BOE benefit maximum might be equal to 12 times the benefit on your personal policy.
BOE benefits can help you cover:
- Rent or mortgage payments on your business facilities
- Employee salaries and wages
- Business loan repayments
- Business insurance premiums
- Equipment maintenance
- Building maintenance and janitorial services
- Office supplies
Joel Palmer is a freelance writer and personal finance expert who focuses on the mortgage, insurance, financial services, and technology industries. He spent the first 10 years of his career as a business and financial reporter.
The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.