FAQ - Disability Insurance

Q: What is Disability Insurance?

Disability Insurance is designed to replace wages lost due to sickness or injury, and is the best way to protect against financial catastrophe. Proper health insurance should cover the majority of your medical costs, but it won't replace lost income.

Q: Are there other sources of disability income?

Sources of disability income stem from three main areas:

  • Employer-paid and/or employer-sponsored programs - The simplest form of disability income is provided by sick leave, which can last from a few days to as long as six months, depending on your employer. Some larger employers also provide long-term disability benefits, which typically begin after a 90-day waiting period and usually replace about 60% of your salary. Such benefits often continue for five years, or to the age of 65.

    Group disability insurance can be fully paid by your employer or may require an employee contribution. In either case, you should find out as much as you can about the group disability insurance provided by your employer. Ask for information and particularly ask the following questions.
    • How long must I wait before benefits begin?
    • How long will payments continue during my disability?
    • Will other coverage, such as government programs, affect my disability payments?
  • Government-sponsored programs - Two well known government programs that provide disability income are Workers Compensation and Social Security. Workers Compensation pays disability benefits if you have an accident at work or you get an illness that results directly from your employment. Social Security benefits can last up to 12 months but are dependent upon many other factors such as marital and family status, salary, and whether you're eligible for other government programs.

    You may also be eligible for disability benefits if you are a State or Federal government worker, a veteran, or are participating in a State vocational rehabilitation program. People with low income and limited assets may also be covered under Supplemental Security Income or Medicaid.
  • Individual Policies - Despite the number of disability income sources, many people don't have insurance or are largely underinsured. If your income were to stop if your ability to work stopped, then having adequate disability insurance is essential to you and your family.

    An individual policy can be tailored to fit your specific income needs and will provide crucial income if you are unable to work.
Q: What should I look for in a policy?

There are a number of factors that make up insurance policies. You need to know what these areas are and what kind of coverage is necessary for you and your family.

  • Definition of disability - Select a policy that pays benefits when you can't work in your field of choice or something appropriate for your education and experience.
  • Extent of coverage - Are benefits available for total or partial disability? Does the policy cover accident and illness? What about loss or sight, hearing, speech, etc.,?
  • Benefit size - What percentage of your income is replaced?
  • Waiting period - How long will it take for your benefits to begin?
  • Duration of benefits - Are benefits paid for one, two or five years, to age 65, or a lifetime?
  • Inflation rider - Does the policy offer cost-of-living adjustments?
  • Renewability - Is the policy non-cancelable, guaranteed renewable, or conditionally renewable?
  • Waiver of premiums - How long must you be disabled before premiums are waived?
  • Option to purchase more coverage - Can you increase your coverage without further evidence of insurability?
Q: Where do I begin?

It's best to start with your monthly and yearly family budget. See how much income you currently need to provide you and your family with the type of lifestyle you've chosen.

Next, determine how much coverage you already have as a result of your employment or through a government program. You can ask your employer for details. You may also want to include any savings you have that can be used in such emergencies.

If these benefits approach the amount of income you require to maintain your current standard of living, then you probably have enough coverage. However, if the total amount of benefits plus your own personal resources fail to meet your income needs, you should consider additional disability insurance.

Disability insurance is especially important if you are self-employed or are a small business owner, since many business owners are crucial to their company's day-to-day success.


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