Disability Insurance: Priceless Protection in Times of Need

Disability insurance provides a portion of a worker’s salary when that worker is unable to work because of injury or illness. The disability insurance payments can provide crucial money to allow someone to continue making mortgage payments, medical bills and meet other expenses while out of work. Disability insurance can be available through a company’s insurance policy for its workers or from private insurance companies.

Two Types of Disability Insurance

There are two types of disability insurance, short term disability insurance and long term disability insurance.
  • Short term disability insurance - This insurance covers a worker for an illness or injury that leaves the person temporarily unable to do their job. Benefits typically cover 50 to 70 percent of a person’s salary. Payments usually start 10 days after a person is unable to work and can last up to a year depending on the policy. Some of the most common reasons people apply for short term disability insurance include pregnancy, back injuries, digestive diseases and injuries.
  • Long term disability insurance - This insurance kicks in after the time limit for short term disability has expired. Long term disability insurance usually covers from 50 to 80 percent of a worker’s salary and can last from 2 years until retirement age. Common reasons people apply for long term disability insurance include cancer, heart disease, pregnancy complications and debilitating back injuries.
Understanding the Terms of Disability Insurance

As with any insurance, a person should fully read and understand any disability insurance policy before signing. A worker may want to speak to a lawyer to make sure the insurance policy fits the needs of the worker.

Common terms to consider include:
  • when the policy begins. Short term policies provide payments in 10 days, but a person can choose a policy that starts later. Long term policies may not cover a person until a few weeks or months after being disabled. A person should calculate how long savings and other income can fill in a gap with no work.
  • how long a worker is required to be at the job or have the policy before eligibility of benefits
  • what percentage of salary will be covered. A person can apply for private or supplemental disability insurance if the policy through work does not cover enough.
  • how long the benefits will last
  • the definition of disability. Some policies consider someone disabled if the person cannot do the job he had. Other policies will not cover someone if they can return to work, but to a different occupation, even if it means a lower salary.
  • if the policy gives “residual benefits” that give partial benefits if a worker returns to work part-time
  • premium returns or waivers. Some policies will return the premium if a worker goes a certain amount of time without making a claim. Other policies waive the premium if a person is disabled for a certain amount of time. 
Factors in the Cost

The cost of disability insurance plans depends on a number of factors, including age, gender, health status, occupation, whether one smokes, and how much coverage a person requires. Plans that are paid by an employee through a group disability insurance plan are taxable as wages, but premiums individuals pay out-of-pocket will not be taxed.