If you purchased a disability insurance policy and subsequently became disabled, your policy's benefits would become activated and the plan would begin providing for those items and situations previously defined in the contract. Repaying money provided by disability insurance is a common concern for consumers unfamiliar with exactly how these policies work.
What Is Disability Insurance?
Disability insurance is a specific type of product designed to pay you a monthly benefit if you get injured and are unable to perform the functions of your job due to that injury. The amount of money you receive from the policy is a percentage of your current earnings. Disability policies protect you and your family against the financial devastation that could result from an extended inability to earn a paycheck. Different types of policies are available, and the length of time you may continuously collect benefits depends on the specific product you own. Short-term products typically have maximum benefit periods of two years or less, while long-term products may pay benefits for years or even decades.
Buying Disability Insurance
The process of purchasing a disability insurance policy is nearly identical to the one used for other types of coverage, especially life insurance. After obtaining quotes and comparing various products from multiple carriers, you must choose a plan and complete the application paperwork. The insurance carrier will likely require you to undergo a brief medical examination to validate the information you provided in the application. At the completion of the underwriting process, the carrier provides you with its firm price for the benefits and features you requested.
It is against state regulations for a disability insurance policy to generate a higher monthly income than what you earned while still working. Most states limit maximum disability insurance benefits to approximately two-thirds of your current gross wages. Such laws are in place to deter and prevent fraudulent claims. When you are injured, the insurance carrier's claim forms must be completed by both you and your family physician. If your injury and subsequent situation falls within the confines of the carrier's definition of "disability," benefits will begin to be distributed based on the amounts and time frames to which you previously agreed.
Once your injury eventually heals and you are able to return to work, you must notify the insurance carrier of your updated situation. Benefit payments will immediately cease as of the date you are no longer officially disabled. Nothing further is expected or required from you. The money you received while out of work does not have to be returned to the insurance carrier. Disability insurance benefits are not considered a loan, and therefore do not need to be repaid. At the time of your insurance application, the carrier took necessary steps to evaluate your potential risk and charge you an appropriate price.
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