Insurance Tips

A Summary of Disability Insurance

Often called disability income insurance, disability insurance ensures the beneficiary’s earned income and includes paid sick leave, short-term and long-term disability benefits. The Social Security is one type of disability insurance that is provided by the government and they offer a floor beneath which everyone, either uninsured or underinsured can benefit. As a result of their coverage, they are large programs with many beneficiaries. The other form of disability insurance is one provided by employees to cover for their employees after getting hurt on the job. Worker’s compensation and the basic disability insurance policies are examples.

Worker’s compensation offers payments to those who are either temporarily or permanently injured and who may not be able to work. This form of insurance is however more than just a compensation since it pays for both past and future economic loss, reimburses medical expenses and its benefits are payable to the worker’s dependents. When it is used to pay for medical expenses, it functions like the health insurance. For those who desire disability insurance but whose employers do not provide these benefits, one may choose to purchase their own policies on the open market. The premiums and the benefits of these individual coverage schemes vary considerably between States, companies and different occupations. For policies that define broader terms where the policy would pay for wide variety of situations, the premiums are often higher as is the case with those that provide more monthly benefits.

A number of variables determine what is covered and the duration of a disability insurance coverage. For example, an insurer is legally obligated to specify the terms of coverage, what coverage is and what is being bought with the premium. Worker’s compensation in this case would therefore not cover a disability claim that is not job-related. How long the insured should wait before claiming payments is another important variable consideration. Most insurance coverage is cheaper because most disability events are temporary. When policyholders agree to wait longer before they can claim payments, this also results in lower premium payments.

Most disability insurance policies will pay some percentage to the beneficiaries such as 80 percent of the regular salary for a period of about 5 years. Alternatively, some policies will pay a flat amount of say, $1500 per month regardless of the salary amount. This prevents the beneficiaries from such things as mortgage foreclosure or running up huge debts during the convalescence period.

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