Disability Insurance Coverage
Life is unpredictable. You never know what will happen next. Disaster can strike at any moment. If disaster does strike, you need to be prepared. For example, if you're in a car crash and are unable to work for months on end – how will you make money? Will you be able to pay your bills? Buy groceries? Could you support your family if you couldn't work for five months?
What is Disability Insurance?
Above are some questions we all try to avoid. While nobody knows when disaster will strike, you can be prepared if it does. From a financial perspective, this is where disability insurance comes into play. Disability insurance was designed to pay you a portion of your income after you run out of sick leave and still cannot work. Acquiring this coverage provides the sense of security and peace of mind should a disaster strike. No matter what – you'll have a monthly income. As such, your lifestyle – home, car, hobbies, saving, food – requires an income. While you insure your car or your home, it's important to insure how you were able to afford these items – your income. There are two different types of disability coverage, short-term and long-term. While we will discuss these coverage options later, it's important to note that the combination of both usually will protect you from most financial ills you may incur due to the inability to work.
Who Needs Disability Insurance?
Thinking about disability is never fun, but there is always a real risk of a horrific event happening. Studies have found that the risk of disability is actually higher than that of premature death. So, you must consider what you would do if you could no longer work. Most of us could not live without working for two months. Borrowing money is an option but getting approved for a loan without an income is rather difficult. This is why you need disability insurance. So you and your family have protection if disaster does occur.
How Much Does Coverage Cost?
There's no exact answer or number for this question, as individuals can tailor disability insurance policies to their needs. Some factors that go into determining the costs of your plan include: Plan types Type of disability covered Optional protections added Elimination period Benefit period Age Medical underwriting Occupation Income With the numerous factors that go into pricing, it's easy to see how pricing will be unique to a person's situation and needs. Most find this coverage to be quite affordable, though.
When Will Benefits Start?
Just like most facets of disability insurance, the time when benefits will start is determined by the plan you're on. Benefits begin to accrue once your waiting period ends. Nearly all plans, whether they are an individual policy or a long-term plan, have a waiting period attached to them. This waiting period is just the amount of time you must meet before benefits start. While plans vary, most benefits begin after a waiting period of 90 or 180 day. If you're selecting an individual plan, you may want to consider how long you can last without a paycheck before deciding on a waiting period for your policy. The longer the waiting period is, the lower your premium should be. Policies from your employer will have the waiting period pre-selected.
How Long Can Benefits Be Paid?
Again, this aspect of disability insurance will be determined by the exact policy you select. Usually, employer-sponsored programs will have chosen this option for you. If you're selecting coverage individually, then you'll be allowed to select the maximum amount of time benefits will be paid to you. While there are a variety of plans available, most of them offer benefits to be paid for two years, five years or until the age of 65. Plans that provide short maximum benefit periods usually will feature much lower premiums.
Short-term disability insurance is one form of these policies. Individuals who select this coverage usually do so because: Immediate coverage from the start of your disability is important Disability protection that is not tied to your job is important Coverage is only needed until the employer-sponsored disability insurance kicks in A shorter benefit period is acceptable in order to keep premium low These types of plans have numerous restrictions. Many times these plans will pay out for 3-24 months. The maximum benefit can vary wildly, but the general plan has an average monthly payout of $5,000. Another item of note is that these policies only cover accidents, not sickness.
Long-term disability insurance is another form of these policies. Individuals who select this coverage often do so due to: The ability to cover costs for the first few months after disability More options to tailor coverage to your exact needs Portable protection that can be available over your career The comprehensive, long-term benefits that will be available if disaster strikes Sickness and accident coverage …And more! These plans typically offer much higher maximum monthly payments. The waiting period is greater, too. Some programs feature waiting periods from two months to one year. The benefit period for a long-term plan can last for two years up until retirement age. One of the major benefits of these policies is that they cannot be cancelled until retirement age. So policyholders are guaranteed benefits until that age, as long as the premiums are continually paid.
Disability Insurance & You
When protecting your income is essential to the wellbeing of you and your family, then it's important to take the necessary precautions. Disability insurance is the precaution you need to ensure money keeps coming in if a disaster were to strike. Before purchasing a policy online, it's important to speak with an insurance specialist to find the best coverage for you. Insurance is always complex, and you can find the best policy for you by working with an expert.