If you're concerned about not having enough money saved up to replace lost wages for up to a year because of a disability, you should consider buying short term disability insurance. Paying a monthly premium is easier for most people to handle than saving up one year's worth of wages. As long as the disability is verified by a physician, you can file a claim and receive payments quickly.
Where to Buy
Your employer may offer short term disability insurance as an optional benefit to employees, which means the rates you pay will be a lowered group rate. Various groups and organizations may join together and buy insurance as a group, offering group rates as well. The best way to find out is to call or visit the websites of every trade association or organization you belong to and find out what membership benefits they offer. If none of these options are ideal or if it's unavailable at your workplace, you can contact an insurance agent and submit an individual application.
You don't get a warning when an accident or injury is about to happen to you. It's unpredictable, and can coincide with other emergencies, such as your car breaking down, which can deplete your savings. Not having a lump sum of cash to replace your income and pay for medical expenses, while having enough for other emergencies, is not often achievable for years. Short term disability insurance will get you what you need, when you need it. Coverage can also help with avoiding debt and paying outstanding bills. You may turn to debt if you don't have income to pay your bills. Although you do have a wait period before the insurance company will pay out benefits, it's good to know that you will get benefit payments and that you'll be able to pay what's due.
You don't receive benefits the day you file a claim. There's a wait period of zero to 14 days, depending on the insurance company and policy. The wait period begins the moment you become disabled to the point when your receive benefits. The longer the wait period, the lower payments you'll have to make up front each month. Even a two week wait period can be problematic for many people, especially those living in a single income household or earning a low income. You don't receive any benefit payments during the wait period. Another limitation of short term disability insurance offered through your employment is that your employer decides on the benefit periods, not you. It's often up to twelve months. This is much shorter than long term disability insurance, which can pay benefits for two or five years, or more until age 65.
Short term disability insurance does not include health insurance coverage. It only replaces a percentage or all of your income, so that you can cover your living expenses. You'll have to make plans for medical coverage through your job or other organization.