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 Disability Insurance

There are many misconceptions about disability insurance. This article discusses the reality of disability insurance and offers valuable information on how to obtain this coverage.

"Unfortunately, Disability Insurance is a rarity in many modern households." 

-The Money Guide

Disability Insurance is an acquired need that we all might not think about but should consider. This valuable type of insurance protects you from the financial loss which often accompanies an injury or illness that renders you unable to work. There are various types of Disability Insurance programs available, but understanding how they work and what they actually protect will help you make an informed decision as to whether it's right for your needs.

Disability Insurance is designed to replace your income if you are unable to work due to injury or illness. When a person suffers loss of income due to an inability to work, it has a financial impact on his or her family. Most families are forced to rely on their savings or debt as a source of income until the person is able to return back into the workforce. In addition, having income replacement benefits can allow you and your family the peace of mind that they will have a financial safety net in case of such an occurrence.

There are several different types of Disability Insurance programs, which include but are not limited to: Individual Disability Insurance, Group Disability Insurance, and Short Term Disability. All of these types of policies have the same basic concept in mind - income replacement. The only real difference when it comes to these three policies is how they come into play and the way they are financed.

The two main types of individual disability plans are Long Term and Short Term. These plans protect workers against income loss due to injuries or illnesses that occur over a period longer than 12 months or less than 12 months depending on the policy chosen. Long term policies cover disabilities that continue after the initial 12 months, while short term policies cover disabilities that last for a maximum length of time as described in the policy.

Long Term Disability plans provide more financial protection than Short Term Disability policies. They are designed to cover loss of income due to a disability which lasts more than 12 months whereas Short Term Disability insurance is often designed to replace income for up to six months. Additionally, many long term disability plans include the option to convert into a permanent insurance plan from which the beneficiary receives monthly payments until he or she reaches retirement age.

Group Long and Short Term Disability Insurance plans are offered by employers at a discounted rate as an employee benefit. These plans are typically offered as a part of a larger employee package, which may include health insurance or life insurance. This makes them not only convenient for the employee but usually the least expensive disability plans available.

Short Term Disability Insurance is more commonly referred to as STD Insurance. STDs can provide a person with up to 60 days of financial protection under a combination of sick pay and short-term disability benefits. Unlike Long Term Disability Insurance, Short Term Disability does not offer any conversions or rollovers and does not provide coverage after the initial policy period expires. STD policies often have an exclusionary clause stating that if you suffer from certain conditions prior to signing on for the plan, you cannot receive claims payments under this policy.

Individual Disability Insurance provides a lump sum amount of money which is paid directly to the policy holder at the time of disability. During this period, the policy holder will generally only have a limited ability to make decisions about his or her rehabilitation and recovery process. This may be especially true for those under age 65 during the first 30 years of this program's existence. After thirty years, most individual policies will pay benefits for anywhere from two months up to one year in duration.

Group Disability plans are made available by employers through a group employer benefit plan such as an employee benefit plan or a retirement savings account plan. These types of plans are only available through a group employee benefit plan.

Short term disability insurance, also known as "short-term" or "STD insurance", is a type of coverage that can help pay income replacement and medical bills if you are unable to work due to injury or illness. Short term disability insurance is governed by the Employee Retirement Income Security Act (ERISA), which means that it is available only through employer-sponsored group plans. Short term disability benefits for most people usually last between two weeks and six months after becoming disabled, depending on the plan chosen. During this time period, benefits typically range from 25% to 60% of your monthly income before taxes.

To be legally established as disability, the worker must prove the inability to work at a pre-determined amount of work. Many types of disability plans will pay the worker's income for a period of time during which he or she is unable to work, usually up to one year. Employers will often require that you be able to perform certain daily tasks before accepting benefits or else you can use your benefits only for medical expenses and rehabilitation. After a certain period of time has passed, most group plans will allow you to convert to permanent disability coverage, where your monthly payments remain for the rest of your life.

How does disability insurance work?

The first step to disability insurance is to check with your employer. Not all employers offer compensation for a disability, but most will. If they do not, you must contact a disability insurance company, which will help you find one that does. The National Association of Insurance Commissioners states that between 96% and 100% of the U.S.'s employers offer group-based disability benefits to their employees. It's very important that you contact your employer as soon as possible so they can tell you about any financial benefits they provide for workers who become disabled or face temporary job loss due to injury or illness.

Within the U.S., the Federal Employees' Compensation Act (FECA) is a federal law that provides options to individuals who have been prevented from returning to work due to injury or illness that cannot be cured or treated within one year. FECA also includes provisions for permanent disability benefits.

If your employer does not offer disability coverage, you will need to buy a policy for yourself on your own without an employer group plan or benefit. There are three main ways in which you can purchase short-term disability insurance: directly from an insurance company; through an independent agent; or through the internet.

Conclusion

Keeping your health is a necessity for achieving financial success. Disability insurance is a form of insurance that can help prevent you from falling into financial hardship due to an inability to work due to illness or injury. It's important that you become familiar with your options of coverage and read the terms and conditions completely before purchasing this type of coverage. Please contact us with any questions about your disability insurance options.

Are you in need of long term disability? Contact us here or call our office at (330) 905-7400 to speak with one of our qualified agents. Our office is open Monday through Friday 8am - 8pm and Saturdays by appointment only.