Disability Insurance Basics

It goes without saying that there are many types of insurance you can buy to protect yourself (and your property).

The most common that are researched online are Homeowners Insurance and Life Insurance.

Homeowner coverage and life insurance overshadow insurance that really should never be overlooked: Disability Insurance.

Disability Insurance is the most important insurance protection you can purchase. Unfortunately for so many people this policy always seems to the last item on the financial plan.

Let us take a look at the Disability Insurance Basics and review why you should have some Disability Insurance Coverage Inforce.

What Is Disability Insurance?

Disability Insurance is a policy that provides you with compensation in the event that you are disabled and unable to work.

Let me say that again…Disability Insurance provides you and your family income to replace your lost income if you cannot work.

Do not overlook the last two descriptions owning a disability policy insures your most valuable asset… Your Paycheck!

Sadly, many people overlook disability insurance because they assume they are covered by Group Benefits at work or will never face a short or long term disability.

Unfortunately, there is no way of knowing what the future holds. However, from experience, I will tell you it is better to have Disability insurance and never need it than to need disability insurance and not have it.

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Types of Disability Insurance

There are two primary types of disability insurance, with both having a specific purpose:

  • Short term disability insurance. This type of policy comes into play once your paid time off through your employer expires. While not always the case, some of these policies will pay you 100 percent of your wages. More likely you will get 60% of your wages or less for a period of time. Short term disability insurance typically covers disabilities that result in being out of work for a period of six months or less. 
  • Long term disability insurance. Long term disability kicks in for disabilities that last longer than six months. The length will vary from one policy to the next. Some policies paying benefits until you reach a particular age, such as 65. Most policies pay between 50 and 60 percent of your wages, but this can be adjusted based on your needs. 

Do You Need to Buy an Individual Policy?

Many people opt against individual disability insurance because they receive coverage through their employer.

While it’s good that you are able to secure this coverage through your work, it’s important to note that it may not provide you with everything you need in the event of a disability.

Also, if your employment comes to an end for any reason, it’s likely that you will not be able to continue your coverage.

When you combine this uncertainty with the importance of always having disability insurance, it makes sense to purchase an individual policy. This ensures that no one can take it away from you, as long as you pay your premiums in full and on time.

How Much Will You Receive ?

This is one of the most important questions to address, as you need to know how much money you will receive from the policy if you make a claim.

This depends on many factors, including the company, the type of policy, and what you choose to pay for.

Most people find that it’s best to choose a disability insurance policy that pays a minimum of 60 percent of pay before taxes. You may need more, based on your lifestyle, but this is a good starting point.

What Does it Cover?

You shouldn’t assume that your disability policy will cover anything and everything that keeps you out of work.

Discuss coverage details upfront with the insurance company you are considering. You must understand what is and is not considered a disability.

While you may consider a particular injury or illness a disability, it doesn’t necessarily mean it will be covered. You should make sure that your policy covers you for injuries and illnesses commonly related to your line of work.

The Financial Strength of the Insurance Company

You should only consider companies that have a strong financial rating, as you need to know that they will be around for many years to come.

This holds true with any type of insurance and is likely something you have considered when purchasing life insurance coverage.

Tip: Search for companies with an A++ rating by A.M. Best.

Final Thoughts

Disability insurance will give you peace of mind that you will have the money you need to get by in the event you get sick or hurt.

Now that you understand the basics, you should have enough knowledge to understand how disability insurance works.

Contact us to get a disability quote form A+ rated companies. 

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