About Disability Insurance

Disability is one of the oldest forms of health insurance. There are many types of disability insurance, but they all have one thing in common. They cover you if you're unable to work. Here is information about disability insurance.

History

In much earlier times, the costs of medical care were minimal compared to today's standards. What really cost people was the amount of time that they lost from work. Franklin Health Insurance Company of Massachusetts offered the first accident insurance policy in 1850 in America. At that time, accident insurance worked like today's disability insurance. The policy didn't cover all things, but only accidents caused by steamboats and railroads. Eventually other companies created different plans that covered illness and different types of accidents. Finally, in 1911 an employer plan emerged.

Function

You can't get more coverage than the amount of money you make. Disability coverage replaces just the income you lose if you have an accident or long illness. If insurance companies allowed people to take out disability insurance that paid more than what they made, there might be a rash outbreak of fraudulent disability claims. Most companies prefer to cover a percentage of the insured's income to prevent fraud and malingering. They coordinate the amount of coverage with all other forms of disability insurance the insured carries, including Social Security disability. The companies also take into consideration the taxation of your income. Disability income payments are tax-free.

Types

Select whether you want a plan that pays you if you can't do your job, or pays if you can't do any job. Some disability insurance pays if the person can no longer do the tasks of their specific job. Surgeons that lose a hand can't perform surgery, but they might take a less paying teaching position. The form that pays you for your own occupation would give monthly checks in this case. The form of disability insurance that covers the inability to do any type of job would not pay.

Features

Every disability policy contains a waiting period and length of time the company pays. Short-term disability insurance pays quickly and the waiting period is very short, but so is the length of time benefits are paid. Most use 7 to 10 days as the period of time you have to be sick before you request coverage, and end at 13 to 26 weeks. The policies cover a specific percent of your income. Long-term disability doesn't start right away and needs to be coordinated with Social Security, because it lasts years or even a lifetime.

Size

Choose an amount large enough to pay your bills. Some companies offer disability coverage to pay off loans. These types of coverage may cost more than buying the same amount of disability insurance through an insurance company. The policies through an insurance company usually have level premiums and you can use them later in life for loans and other payments. The price on the disability insurance goes up as you get older, so a privately held policy ends up being more efficient.

Considerations

Prepare for a high premium if you work at a job that requires a lot of manual labor. People at desk jobs often can go to work even though they may be in a wheelchair, for example. If your work involves physical labor, the odds of your disability increase and so does the premium. Even though the premium is higher, it's still wise to purchase a policy.