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Understanding Disability Insurance, Coverage And Policy

Disability insurance as the word speaks will provide assurance if you become disabled and can no longer perform work in order to earn your income. It will help you in difficult times when you become sick or hurt and couldn’t work. Disability insurance can replace a portion of your income when you are unable to work (anywhere from 45-60% of your gross income on a tax-free basis).

Its the most difficult time to overcome, to maintain a standard of living, to pay your bills, look after your children and many more. This is when disability insurance is most needed.

Understanding disability insurance is the most difficult part. Every disability insurance policy from every insurance company is different. Every plan has a definition of total disability in the policy, you should always know the exact language of this definition before you own anything. Total Disability definition is the key in deciding to choose the type of insurance.

Benefits of disability insurance

  • This is only paid for individuals with any disability.
  • They will cover you with the income when you are unable to do your regular work for certain weeks or months.
  • This is paid if the disabled person is carrying disability insurance coverage.

Types of disability insurance

Mainly there are two types of disability insurance. They are

A) Long-term disability insurance.

This type of insurance has more restrictions when compared to the short term disability. This insurance has a delay time known as elimination time period. If you select for long term disability then the premium payments will be less than the short term disability. Choosing the affordable elimination time period is much better. They will cover up to 70 percent of the actual salary. The average waiting period for getting these insurance payments is 90 days. Some of the companies will cover you for a small period that is for 65 years and some will pay up to your retirement time.

B) Short-term disability insurance.

Short term disability insurance will pay for the persons who get sick or injured for a short period of time. The person carrying this insurance should be an employee for at least more than twelve months. The insured party should cover minimum hours by working for full time at the workplace.

What is Disability Insurance Coverage?

The disability insurance covers one from financial problems when one suffers from some health problems due to some unexpected incidences. Let us know actually what is disability insurance coverage. The disability insurance coverage is a kind of promise which prevents all the problematic issues that occurred when one cannot continue to work at their workplace. One may not be sure of occurring problems in their life. The disability insurance coverage helps you in preventing these unexpected problems.

The disability insurance coverage will not replace the cost but it recovers some amount of the insured’s total income if in case the insured cannot able to work. The disability insurance will help you in covering monthly expenses and helps to meet the day to day living expenses. For an individual, the disability insurance covers around 80% of their income and for a group, it covers around 60% of their total salary.

The short term disability insurance coverage is one of the types of disability insurance coverage which avoids you from all financial problems for a shorter period of time when one becomes disabled because of illness or some small health problems. It helps you in fulfilling your requirements if in case there is no other source of getting money if you are disabled. It allows one to meet their financial needs.

The long term disability insurance coverage is the second type of disability insurance coverage which provides the insured’s income in case of disability occurred due to some injury, illness or even mental disorders. The long term disability insurance coverage includes

  • Recovering of 70% of the insured’s income
  • Advantage of $25,000 for one month
  • Child caring benefits
  • Benefit expenses related to medical
  • Accommodation
  • The insured who is disabled partially can work and earn up to 20% of their actual income.

Disability insurance coverage allows one to have a happy life even in situations where your monthly wages get stopped due to some health problems or some illness. It is one of the secured forms of option for your better future.

Types of Disability Coverage

There are three major types of disability coverage

1. Own Occupation: Under this type of plan if because of a sickness or injury you can not perform in your occupation, you will be considered totally disabled, even if you choose to do something else. But most people prefer to go back to work in some other capacity So you get the monthly checks and still can earn another source of monthly income.

2. Any Occupation: Which would stipulate that you are unable to perform any occupation. under this plan, once you have applied for the claim and start receiving monthly checks from the insurance company, then you cannot go back to work, or earn another source of income. if you choose to work, you can be penalized and your policy can be terminated.

3. Residual Disability: What happens if an insured is only ‘partially’ disabled?
Under the definition of total disability, no benefits would be paid. To solve the partial disability problem, the ‘residual’ disability concept has been developed.
The basis of a residual claim is that a person is still actively engaged in their
occupation, but because of a sickness or injury he is:

  • Suffering a loss of time and duties
  • Suffering a loss of income of at least 20%

An insured receives a percentage of his or her disability benefit based on the percentage of income loss the sickness or injury has caused.

Consider the following points, while looking for disability insurance.

Renewability Provisions: One of the most important aspects of a disability insurance policy is the renewability provision. They are of 2 types:

  • Guaranteed Renewable – A guaranteed renewable policy cannot be cancelled by the insurance company even if a change in your circumstances would make you a greater risk.
  • Noncancellable – There is a type of individual disability insurance available which offers an insured a guaranteed future premium.

What is Disability Insurance Policy?

Everyone in the world falls sick or suffers from health problems in some of the other time. That situation keeps one out of their occupation which further results in loss of their income. Due to the loss of their income, one suffers from financial problems and do not meet their requirements. The disability insurance policy avoids you from such critical fiscal problems. Most of them will not be aware of what is disability insurance policy.

One should have a clear idea about the features of disability insurance policy as there exist different types of disability insurance policies. The disability insurance providers offer both short term disability insurance policy and long term insurance policy. The long term disability insurance policy is considered if the insured is disabled for more than half a year or up to retirement age. At the time of disability, the short term disability insurance policy pays around 70% of the insured salary whereas the long term disability insurance policy pays up to 60% of the insured’s actual salary.

The disability insurance policy is purchased at younger ages. While purchasing a disability insurance policy, one has to be clear about the renewable process of your purchased policy. There are few renewable options provided by the disability insurance policy providers. They are

  • Not cancelable
  • Conditioned renewable
  • Guaranteed renewable

Not cancelable: This is one of the renewable options which renew the original disability insurance policy without any increment in premiums.

Conditioned renewable: In this type of renewable option, the provider can include some additional conditions, rules and terms anytime and even the provider can increase the premiums of the insured’s policy.

Guaranteed renewable: The guarantee renewable is another type of renewable options at which your disability insurance policy is revived regularly by the policy provider. It increases the policy’s premium rates whenever.

Make sure of the type of disability you want to purchase. Different disability insurance providers offer different disability insurance policies at various costs and with different terms and conditions. Purchasing disability insurance policy for an individual allows having complete control of individual requirements. It is more reliable and has no serious drawbacks when compared to group plans.

The disability insurance policy saves you from future problems to some extent. As the chances of becoming disabled are more nowadays, having a disability insurance policy is more useful and secured one for our future and to live a happy and secured life.

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