If a sudden disability or illness caused you to become unable to work, how would you earn a monthly income? We depend on our ability to make money by working to pay for our homes or rent, cars, food, and other living expenses. Disability insurance is a type of insurance that can offer you protection in the event that illness, a disability, or a pregnancy prevents you from working by paying you a percentage of the monthly income you would have earned were you able to work.
Regardless of your job or marital status, disability insurance is available, and is a valuable type of protection that can offer assurance and peace of mind through the knowledge that you and, if applicable, your family’s income will be taken care of.
There are two types of disability insurance available for consideration:
Short-Term Disability
This type of disability is frequently provided by an employer. When an individual becomes injured or ill and is covered by short-term disability, they receive an income during the early period of their injury. Depending on the insurance provider, the individual may receive disability benefits for 2 weeks or up to 2 years.
Long-Term Disability
Long-term disability may be offered by an employer or purchased separately by an individual. This type of disability replaces income during an extended period of time, normally for 2 years, 5 years, or until the disabled recipient turns 65. There are two types of long-term insurance available to individual consumers:
– Non-cancelable long-term disability: Under this type of long-term disability coverage, the recipient has the assurance that their premium (monthly cost of insurance), will never be raised, and, that their policy (the insurance contract) cannot be cancelled as long as it is being paid on time;
– Guaranteed renewable long-term disability:This type of policy, usually less expensive initially, allows the premium to be raised, but only if it affects a class of policy-holders.
Employer-offered Coverage
Frequently, a person will be offered disability insurance through their place of employment as a benefit. This type of disability insurance is called group coverage, and is almost always less expensive than purchasing individual coverage. Professional or union associations may also offer disability insurance to their members. Normally, a person must work or have been a member for a specified period of time before becoming eligible for disability benefits. This period of time is called the service wait. An employer typically will cover part or all, of the insurance premium.
Coverage Tips:
– Group disability coverage entirely through an employer or professional group may not offer the protection you need.
– If your employer or professional association offers a disability policy that does not pay 60% of your income, minimum, does not offer benefits to those who are 65, or, that has a benefit waiting period that lasts longer than your savings, you may want to research individual coverage for added protection.
– Employee-provided group coverage may be subject to taxes.
Individual Coverage
When a person pursues disability insurance on their own, they are seeking individual coverage. Also referred to as private coverage, this type can be very expensive, and each policy can be extremely varied. Items that can cause variables in policy coverage and price include the person’s age, their health and health history, the policy features they choose, and the risk or hazard factor of their occupation. A roofer is more likely to have a higher disability premium than an accountant.
Individual coverage policies are adapted to meet a person’s needs. Frequently, individual disability coverage is sought when a person’s employer-offered disability policy does not adequately meet their needs.
Coverage Tips:
– Individual coverage is becoming increasingly difficult to obtain;
– Because you must tailor a policy to suit your requirements, it is vital that you understand each policy offering so there are no holes in your coverage;
– The better your coverage, the higher your premium;
– Benefits from individual coverage are not subject to taxes.
When opting for individual disability coverage, it is very important to shop around for the best policy, options, and price.