Disability Insurance Coverage: What You Should Know

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Will your family still have a way to pay the mortgage, the health insurance, the car payment and buy groceries if you should become disabled? If not, start by filling out our user friendly quote form and let us help you make sure your family is fully protected. In the meantime, we'll help you understand the mechanism of disability insurance.

Defining disability insurance plans, long term vs short term
Many people think they have disability insurance through their jobs. You may be one of them, and you may be correct. However, with the increasing costs of providing health insurance for employees, many employers now only carry short term disability for their employees.

Short term disability in some cases is nothing more than a specific number of sick days for which you will be paid each year. In other cases, short term disability is insurance that will give you a percentage of your paycheck for a set time period. This may range from a few months to about two years. Some employers also tie the earned disability time to the number of days you have worked, so if you have worked for one employer for many years, you could have more disability time than a person who started recently.

The assumption of short term disability is that you will be able to return to work by the time the disability allowance runs out, if not sooner. If you cannot return to work at that time, you will lose your job and have to apply for Social Security disability. Those who know they are permanently disabled can sometimes use the employer's disability benefit to supply an income while going through the application process for Social Security disability.

Long Term disability is usually a type of insurance you have to purchase yourself. The terminology is confusing, however, because employers often refer to a disability insurance of two years as "long term." Most employers think of short term disability as an illness of only a few weeks.

True long term disability will provide you with a portion of your income until you either qualify for social security disability or until you reach the age of 65. It is possible to be "own-job" disabled without being totally disabled. A good disability insurance policy should allow you to collect if you are unable to perform your job. This is called "income replacement" and should last until you are able to learn a new job or until you are old enough to begin collecting social security. Social Security will not provide you with a disability income unless you are "totally" disabled, unable to perform ANY gainful employment.

What premium can you expect?
Premiums for long term disability vary widely and are dependent on two primary factors. The first is the percentage of income you want to be able to collect. The second is the danger rating of your job. Your agent will look up your job classification in a standard table. A dangerous job will mean a higher premium than an office job, for instance. Some companies will also include a waiver of premium once you have been receiving benefit for three months. In fact, some also return the premium you paid during those first three months.

Additional premiums are determined by the riders you add. You may choose an unemployment waiver of premium which would simply pay your premium for a few months if you are laid off. A cost of living rider is another option, although plans typically pay on the basis of your average income for the three years prior to going on disability.
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Note: Misspellings that are frequently used to find information on this type of coverage are: insurence, disablity and insurnace.

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