Disability income insurance comes into picture when a person meets with an accident or suffers from an illness that leaves him disabled for an extended period of time. This disability is not only physical but also holds back the person from earning a decent living for himself and his family. To top it all, the person may have to cope up with added medical expenses. This type of insurances have been designed, in order to protect a disabled person from a financial burden. It pays a benefit of 50-70% of the income earned before the disability. This helps cushion the mounting expenses and supplements income till the person is able to resume work.
It is advisable that this type of insurance should be opted by every working individual. Married couples should never take disability income lightly thinking that they have their spouse’s income to live on. Imagine what will happen if one of the two stops working. Single people need this insurance more than the married couples, as they will have no one else to fall back on but themselves.
The thought of a wheelchair and hospital often sends shivers down one’s spine. Most of the disability coverage is offered by employers and government programs.
The short-term disability income insurance is useful when one is temporarily unable to work. This is usually due to some short-term illness or injury. This coverage is given after one has used up the entitled sick leaves. The benefits are approximate to the level of your income initially. They then gradually fall down to 60% of the income and continue for six months.
Long-term disability income insurance is used to cover permanent disability. After the short-term insurance ends, this one continues for at least 5-10 years. A permanently disabled person needs to be covered under insurance that gives benefits till retirement.
There are of three types of long-term disability insurances, based on who pays the premium. The first type is paid by the employer, the second by the Social Security Administration (SSA) and the last one by a private provider. Most of the employers provide short-term insurances, that can replace about 60% of one’s income. Also, the duration and ailments covered are limited. The social security disability income from the SSA requires extensive medical documentation of the illness or injury in order to be eligible. If it is found that the person can be employed in another job, he/she may be disqualified from claiming the benefits of this type of insurance. It also depends on one’s contribution to the social security.
If one finds that the above two disability insurances won’t offer protection until retirement or the benefits are much below one’s standard of living, then the private disability income protection insurance can prove to be a favorable option.
It includes many types of disability insurances like individual policies, group policies, group association policies, specialized group policies and riders attached to life insurance policies. Private disability incomes offer more comprehensive benefits than the social security benefits. Individual polices offer more coverage, although it can prove to be a bit expensive. When one is choosing an individual private insurance, understand the different definitions of disability mentioned in the policy. Few polices offer benefits only if one is unable to perform the duties of a job that he/she is qualified for and has training, experience and education in it. Many policies provide ‘own occupation’ coverage for an initial period of 1 to 2 years. This policy then gets converted into ‘any occupation’ coverage.
Many polices waive off the disability premiums for temporarily unemployed individuals who have a disability policy till they return to work. One should be aware that the employee paid disability income benefits are taxable under the law. The most valuable asset is one’s ability to work and to be financially independent. Your family depends on your ability to earn. In today’s testing times, one can secure his/her future by opting for such disability insurances. It is an individual choice to opt for group insurances or individual ones. Choosing a disability income insurance is a smart move to remain secure and financially independent.