Disability Insurance: Policy that minimizes financial loss

by Guest » Mon Sep 17, 2007 11:14 am

Disability insurance pays you (policy holder) an income if you become unable to work due to a disability resulting from an accident or illness. You may have thought about insuring your life, your health or your assets. But have you thought of insuring your ability to earn? Disability insurance gives you the scope to safeguard your income when you are not able to earn.

If you have a family that depends on your income you surely must have disability insurance policy to protect your earning capability. Studies have shown that an average human being has more chances of becoming disabled from an accident or illness than dying. So, it is not unusual that you too have a chance of becoming disabled.

What are the basic types of disability insurance?

You may take disability insurance for a long term or short term depending on your requirement and choice.
  • Short term disability insurance policies provide benefit for maximum 2 years and only after a waiting period of 0-14 days.
  • Long term disability insurance policies provide benefits that range from a few years to the rest of your life after a waiting period that ranges from several weeks to several months.

You may opt from the 3 basic types of disability insurance coverage:
  • Social Security Disability Insurance (SSDI): This federal government provided insurance is for workers with a disability that is diagnosed to last at least 12 months and does not allow them to earn fruitfully. SSDI needs the policy holder (you) to provide medical evidence for the disability. In addition, you are also required to match the medical listing set by Social Security Administration (SSA). Otherwise your residual working capacity will be taken into consideration. Benefits from Social Security include:
    • Monthly wage
    • Medicare
    • Vocational Rehabilitation (if the policy permits)
    • Other employment support programs

    Click here for more information.

  • Employer-Provided Disability Insurance: There are several companies that offer disability insurance policies as part of the employee benefit plan. For individuals who receive long-term disability protection, the benefits may rise up to 65% of the salary for 5 years or till the time the individual reaches the age of 65 years. Sometimes the benefits may also extend to your lifetime. If the premiums are paid by your employers then you will have to pay the taxes as levied on the benefits you receive.

  • Individual Disability Insurance: Self-employed individuals seeking disability insurance may find policies with the private health insurance companies. Such individual policies may be comparatively more expensive than group disability insurance policies and the premiums and benefits received largely depend on your occupation, state and country. With such a policy you may receive disability insurance benefits between 50% and 70% of your income compensated.

How do insurance companies determine disability premiums?

There are quite a few factors that are considered while determining disability insurance rates. The factors include:
  1. Age
  2. Gender
  3. Occupation
  4. Susceptibility to disability
If you are involved in construction and work on fields or are involved in site works, you will be considered more vulnerable to injury and illness compared to others who stay inside the office for the entire day. Hence, if you have a lower risk of getting involved in accidents or falling ill, your disability insurance premiums will be low.

If you plan to get disability income insurance you must get it as soon as possible because the earlier you get it the better for you.

There are again 2 protection features of disability insurance:
  • Non-cancelable: In such a policy the insurance company cannot cancel the policy of the insured except when there has been a non-payment of premiums. You may get this policy renewed every year without your premiums being increased or your benefits being decreased.
  • Guarantee renewable: This policy guarantees the policyholder the ability to renew his policy and get the same benefits as before. However, premium rates may go up as decided by the insurance company and this holds good for all other policies in the same class.

Is there a way to save money on disability insurance?

Yes, you can keep the cost of disability insurance down with the following 2 tips:
  1. Elect a longer waiting period before receiving benefits: You can lower your premiums if you can manage enough resources to cover your expenditure during the first 3 months of disability. So start saving.
  2. Elect a limited/shorter benefit period: This means that you will receive disability insurance benefits up to the age of 65 and not for a lifetime. But do not go for a benefit period that ends before normal retirement age. You might pay lesser premiums but again you will also find inadequate coverage when you need it most.
Ask your agent for disability insurance quote and make sure you have 3 to 4 quotations to compare and get the best offer.

When can you claim disability insurance benefits?

Disability health insurance claims can be made if:
  • A disability arises due to unpredictable conditions. This means that your disability is not from an earlier known medical condition or a chronic illness.
  • You have a disability while you are at work and the disability arises as a result of any work related issue.
  • The waiting period is over.
To know about short term disability insurance claim click here.

Who receives partial disability benefits?

Partial disability benefits are received by employees who are partially disabled. Partial here would mean an employee's inability to perform 80% of his normal work duties. In such a case, the remaining 20% of work that the employee can do will not be compensated.

What are the benefits of disability insurance?

Benefits received from employer provided disability insurance as well as SSDI are:
  • Tax Benefits: If the premiums are paid by you using post tax dollars, then you need not pay any tax on the benefit amount.
  • Discounts: While there are employers who offer insurance at a discounted rate, there are others who offer short-term insurance for free and at the same time give employees the option of choosing long-term insurance on discounts.
Benefits are paid one month in arrears. An individual may receive benefits as long as he/she continues to be disabled or meets eligibility requirements. The beneficiary will, however, be reviewed to see if there is any improvement in the condition. This will in turn determine whether he/she still is eligible to receive the benefits.

If you can anticipate the probability of being disabled due to any reason, it is best that you get yourself covered under the disability insurance policy. Ask your agent to explain the policy to you in details. Sometimes a general policy may not cover a critical illness. Purchasing add-on policies at times like these always help. So assess your risks and invest for your future.

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Hi, I'm curious about disability coverage. What do they normally covered? Will they cover partial disabilities? Is it a wise purchase when we have social security disability benefits? Tim k Wallace

Total Comments: 64

Posted: Mon Jan 23, 2012 09:12 am Post Subject:

No one here can tell you what your policy provides for. You might have to be disabled for 6 months to 2 years before a benefit is payable. Then again, you might not even have any DI insurance at all.

You don't even tell us if this was work related or not.

More information is needed.

Posted: Thu Mar 01, 2012 07:08 am Post Subject: medical insurance

if something happens to my husband and he is entitled to his ltd benefit, will he also qualify for health insurance under my employer (IE will collecting disability disqualify one from getting health insurance)

Posted: Thu Mar 01, 2012 08:09 am Post Subject:

Group health insurance contracts generally make no distinction between active and disabled dependents, at least as far as initial enrollment or open enrollment periods are concerned. However, in an application for insurance, all questions must be answered accurately, and if a question appears concerning a dependent's disability, it must not be overlooked or answered falsely,

A health insurance company's genuine concern about disabled dependents is whether their health care expenses are due to a prior worker's compensation claim which may still be covered under that scenario. One's own health insurance is not intended or responsible for paying for the cost of care resulting from third-party causes (like work-related injuries and illnesses, or traffic collisions).

Where disability affects eligibility for group or individual insurance is in the area of preexisting conditions. A permanent disability due to loss of limbs or eyesight is different than from a back injury or heart attack or stroke.

The whole landscape concerning preexisting conditions was altered in the 1990s with the passage of HIPAA. If a person (including dependents) was covered by a group health insurance plan and leaves that group, he/she must be granted access to a new group health plan at the earliest eligibility point. If any such person has a preexisting condition for which coverage would be excluded for a limited period of time (such as 6 months), but covered even as a preexisting condition once the person had been covered by the new group plan after a limited period of time (such as 6 months), HIPAA permits "creditable coverage" to count on a month-for-month basis against the exclusion period.

Also, HIPAA provides that a dependent spouse covered by their own employer's group health plan who leaves that plan must be immediately covered under their spouse's upon application, and not forced to wait for the next open enrollment period, subject only to the preexisting condition exclusion/waiver as described above.

Is your husband currently an active participant in an employer-sponsored heatlh plan? Or is he currently disabled and not covered by any health insurance?

Posted: Thu Apr 26, 2012 01:33 pm Post Subject: Dear friend. I truly just like your posting and your current

Just to let you know, this page looks a little bit odd from my android phone. Who knows perhaps its just my mobile phone. Great post by the way.

Posted: Thu Jul 26, 2012 03:09 pm Post Subject: pre taxed insurance

is alflac insurance pretaxed

Posted: Thu Jul 26, 2012 08:05 pm Post Subject:

AFLAC's voluntary supplemental benefits are paid for with after-tax dollars which generally makes the benefits tax-free. I believe that's the answer to the question you were really trying to ask.

Posted: Sat Aug 25, 2012 10:29 am Post Subject: Insurance

As you said disability insurance pays an income if anyone become unable to work due to a disability or illness..
So, when we will have to pay money to insurance company before this incident..and for how long time they can provide us their facilities.?

Posted: Sat Aug 25, 2012 06:59 pm Post Subject:

So, when we will have to pay money to insurance company before this incident..and for how long time they can provide us their facilities.?

You need to meet with a local insurance agent and discuss your needs. Your question is too broad to properly answer here.

Disability insurance, like all other insurance, is something for which you make an application to the insurance company, receive approval or are declined for coverage, and then pay premiums. How long your benefit period lasts is a discussion between you and the insurance company based on your needs and your ability to pay the premiums.

Posted: Sun Jan 06, 2013 05:53 pm Post Subject: short term disability

im shopping

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