Disability insurance is something everyone should invest in, even if you don’t think you’ll ever need it. Here are four things you need to know about disability income insurance.
1. There Are Two Main Types
Disability income insurance comes in two main types: long-term and short-term. Long-term insurance is meant for those with long-term or lifelong disabilities, such as serious injuries or cancer diagnoses. Short-term insurance is coverage for temporary disabilities, such as a surgical recovery period. Short-term insurance lasts anywhere from several weeks to two years and typically has no waiting period or a very short one. Long-term insurance has a longer waiting period, which can last for several months, but is meant to cover the affected employee for his or her whole life.
2. The Cost May Vary
Short-term and long-term disability insurance coverage have different price points due to their different requirements and the coverage they offer. However, there are also other things that may affect your insurance premium. The premium is based on a small percentage of your annual gross income, but it can be affected by certain attributes that apply to you. Gender, pre-existing conditions and certain behaviors and habits, such as whether someone smokes, all affect the price of someone’s premium.
3. Coverage Depends on How Disability Is Defined
Disability insurance can be complicated due to the difficulty involved in defining disability on an individual basis. This definition varies by provider and by policy. There may be specific qualifications you need to meet before you can be approved to receive these benefits. Your insurance provider may differentiate between any-occupation or own-occupation disability or it may include the category of partial disability alongside short-term and long-term disability.
4. There Are Some Special Considerations
Disability insurance has some special considerations that other types of insurance do not. Unlike a health insurance policy which is paid out per service or appointment, for example, disability insurance is paid out monthly. This is due to the insurance focusing more on ensuring the employee has access to all or part of his or her income rather than helping the employee to pay for healthcare. Other special considerations include waiting periods and non-cancelable policies.
No one expects to become disabled, so not everyone thinks he or she needs disability income insurance. However, making sure you have that coverage is a good preventive measure in case you ever do experience an event that causes temporary or permanent disability.