Often referred to as disability income insurance, disability insurance is a type of insurance policy that insures that a person receives long term financial benefits in the event of an accident that leads to an inability to work or function, or if a person becomes afflicted with an illness, leaving them unable to work. Disability insurance benefits can be disbursed either as a short-term disability, long-term disability, and paid sick leave.
The purpose of disability insurance is to replace the lost income from your work income if you were to suddenly become disabled. The policy that one purchases will contain an outline of the conditions of which one is eligible to receive disability benefits. That is, there will be an explanation within the policy about what constitutes a disability. Normally, one has to be on leave from work for a specified time period before they can begin to receive disability benefits. The policy will define the amount of the payments and the length of the coverage. The payments will continue for the length of the disability, or until the time limit that was set by the insurer has expired.
A disability policy premium that one pays is determined by a number of factors that are devised by the insurance company. This can include risk factors associated with the type of work that one is involved in. For instance, a person working in a high risk job such as explosive demolition of buildings will usually pay a higher premium than a receptionist. Disability benefits are designed to replace lost income so you can use the payments for your own personal needs. Insurance companies will not allow you to have disability coverage for more than about 60 percent or 70 percent of your normal taxable income
Disability Insurance Costs
Policies for disability insurance can vary among providers so it is important to obtain a number of quotes from different providers. You should know what is included in your policy before you make the purchase. Cheap policies may not be the best policies. Because you may not be covered for certain incidents that may result in an injury, or debilitating illness, it is important to read your policy carefully.
How are private disability policies different from Workers Compensation?
With worker’s comp, you are only covered if you are disabled due to a workplace injury or illness. With private disability insurance, you choose the benefit level, buy the policy yourself, and then pay the premiums. The policy does not depend on staying with your current place of employment. It is also not limited to work related disabilities
Who should purchase disability insurance?
Anyone who is employed should have disability income insurance. It is important to check to see if you have group disability, Social Security Disability, workers compensation, in order to find out how much you are covered for. It may not be enough to sustain you if you are disabled. You should make sure that you will not find yourself in a financial crisis if you are suddenly disabled. Your family may need to depend on the income to maintain their lifestyle.
Whether you are single, married with a family, young, or old, you never know when a tragic event may occur leaving you unable to earn an income. The right disability insurance will give you peace of mind knowing that you are protected.