Disability insurance is an oft-overlooked, but nonetheless critical, component of a person’s insurance portfolio. Automobile and home insurance policies protect those two necessities, and life insurance pays a cash amount to a beneficiary in case of death, but what about a person’s income while he or she is still living? An illness or injury – whether on or off the job – can diminish or even eliminate a person’s ability to earn a salary. In such a case, disability insurance can pay for an individual or a family’s expenses.
A disability insurance policy provides a set amount of income to a person who has suffered a serious illness or injury which prevents him or her from performing the duties of a job. Once the illness or injury occurs, there is typically a short waiting period – typically ten days to three months – before the disability insurance policy takes effect. During this time, a person submits a claim to the insurance company.
Just as other insurance policies vary in types of coverage and payout amounts, so too does disability insurance. One can purchase a policy to cover all or just a portion of a person’s income. In addition, the policy may be for short-term coverage or long-term coverage, which means that it will pay a benefit for as little as a few weeks or for a lifetime. The cost of disability insurance policies varies based on the type of coverage and the payout amount.
Many employers offer disability insurance as part of a suite of other benefits, like health insurance or paid vacation time. The premium for this coverage may be paid by the employer, or it may simply be available for the employee to purchase. Sometimes an employer will offer a very basic policy with minimal benefits, in which case it is in the employee’s best interest to find out what the coverage will be and whether or not the policy can be upgraded.
Many professionals who have their own practice cannot rely on an employer for this type of coverage. Many insurance carriers have options available for these individuals to purchase their own coverage. For example, you can find companies offering disability insurance for physicians.
A state’s regulations may require an employer to provide workers’ compensation insurance. This coverage helps an employee in case of injury, but only if that injury is sustained while on the job. An illness or off-the-job injury is likely not covered. In addition, it typically only covers a percentage of an employee’s income and may not be enough to pay a person’s bills.
It is always a good idea for a person to periodically evaluate his or her insurance coverage in the case of a catastrophic event. A simple fall off a ladder or trip to the doctor might result in an injury or illness which can prevent a person from earning a living, in which case disability insurance can help sustain a person’s way of life.