Disability Insurance: Fact vs Fiction

What is disability insurance and who needs it? Life can change in seconds and the ability to continue paying your expenses is important to consider when you want to find the right type of disability insurance because the right policy can assist your family.

Types of Disability Insurance

There are two main types of disability insurance.  Short-term and long-term insurance are the two major types of insurance.

  • Short-term disability insurance, covers any short-term disability. This disability insurance has at least a two week waiting period and usually has a benefit period lasting up to 13-26 weeks. Short-term disability insurance covers up to 100% of your income.
  • Long-term disability insurance covers long-term disability. There is a longer waiting period with long term disability insurance. It is usually 30-180 days. The benefit period is also longer. The typical benefit span is 5 years, but can be extended up to retirement age. Long-term disability pays up to 70% of your pre-tax income. There are also various types of long-term disability policies:
Own Occupation covers your income from the job you were performing when you became disabled, even if you have another type of job.

Regular Occupation covers your income in the job you have at the time of disability. You cannot be forced to take another position, and you get 100% of your income. If it is your choice to work in another position, your benefit will be adjusted accordingly.

Any Occupation is the insurance type offered when you cannot work at any job at all. This type is very strict and requires that you be on Regular Occupational disability for at least 5 years.

Fiction vs Fact
  • Fiction: Healthy people do not need disability insurance. This is not true because anyone, healthy or not, may find themselves disabled and unable to work. Accidents at work happen to everyone, sick or not.
  • Fiction: Your home is your largest investment. Your continued ability to earn an income is worth a lot more than your home. Your earning ability is the way you provide for you and your family.  Insuring the loss of work is critical.
  • Fiction: I don't need disability insurance, I will just use workers comp. insurance. Workers Compensation insurance will pay your medical bills and a portion of your lost income. Additionally, in order to be eligible for this type of insurance, your disability must have happened while doing your job. If you are disabled due to an accident or illness that is not work related, workers comp. will not pay!
  • Fiction: Your employer will pay. Only 5 states require employers to carry short term disability insurance on their employees. Most employers do not offer this coverage due to the high premium and company expense.
  • Fiction: The Government will pay me if I cannot work. Even if you are totally disabled and cannot work, government benefits are very difficult to qualify for and take a very long time to get approved. Once approved, the benefit will probably be a fraction of your income.

These are all things you should consider while thinking about disability insurance. Make sure you know the draw backs and benefits. Talk to your insurance agent for more specifics and details about your current situation to get the policy for your needs.

blog comments powered by Disqus