An Understanding of Disability Insurance
When you're young and healthy, disability insurance isn't always a priority, but a disability opens you up to financial difficulties. The loss of income, coupled with the disability itself, leaves the family overwhelmed and struggling to make ends meet. The disability insurance pays a portion of your income to cover your expenses during your absence from work. An understanding of disability insurance allows you to determine if it is right for you and how to go about securing a policy.
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A disability insurance policy pays a portion of your income in the case of a qualifying disability. On most policies, the maximum monthly amount allowed is 60 percent of your gross income for that month. For example, your gross monthly income is $5,000, you qualify for disability insurance with up to $3,000 per month. The policy defines what qualifies as a covered disability. When you become disabled, you file a claim with the insurance company. If approved, you receive the monthly amount specified in the terms. The policy also includes a length of time you qualify to receive the benefits. Some policies establish waiting periods, forcing you to wait a specific amount of time after the disabling event before the benefits kick in.
Group Disability Insurance
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Like health insurance, a disability insurance policy is available through work as a group plan or on your own as an individual policy. Companies may offer short-term disability, long-term disability or both to employees. Short-term policies start paying right away and cover things like injury, childbirth and illnesses. Long-term disability takes over after short-term disability benefits stop. The specific time period before long-term disability begins varies, depending on the length of the short-term benefits. Check with your employer to determine if it offers any disability options.
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Individual Disability Insurance
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An individual plan allows you to secure your own disability coverage if you don't get it through work. An advantage to buying your own policy is that you keep it even if you switch careers. Even if your company offers disability coverage, you have the option of buying an individual policy for an additional 10 to 20 percent of your salary for additional income. Your personal factors including age and health affect the premium for a disability insurance policy.
Alternatives
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Other options may pay you a portion of your salary depending on the circumstances of the disability. If an work injury results in a disability, workers' compensation compensates you to some degree. The amount and length of payments varies, but workers' compensation may not cover all of your expenses. For those who work for an employer, Social Security disability payments are a possibility. The payments are calculated based on your income and how much you pay for Social Security.
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