Have you ever wondered about the coverage characteristics of disability insurance?
Well this type of insurance provides financial compensation when you are disabled or injured to the point that you are unable to work.
Now, the compensation is not always to equal the amount of income that you would generate were you still able to have that job.
Disability insurance can generally cover any amount from 70% up to 100% of what you used to make while employed. Your payout amount as well as how long the insurance payout lasts depends upon the state of the disability and what type of disability insurance has been purchased.
Factors of Disability Insurance
Since disability insurance is underwritten medically, your health is fully considered. This also means that any preexisting conditions that you may have are also taken into consideration. There is short-term and long-term disability insurance. When you are initially injured or fall ill, or if the disability is not deemed one that comes under the long-term category, you may only qualify for short-term disability insurance. Your payout period from short-term insurance can last anywhere from 6 weeks to 2 years. There may be a waiting period of about 2 weeks before you begin receiving your disability benefits. With short-term disability, the amount of your benefits is likely to be 80-100% of what you were paid while you were employed.
If your injury or disability qualifies you for long-term disability insurance, you may experience a waiting period of about 90 days before your benefits begin. Your insurance payout is likely to top off at an amount that is 70% of what you made while you were employed. Your long-term insurance can last for a period of 5 years up until you reach the age of retirement.
Common Types of Disability Insurance
When employers buy disability insurance they often go with group plans instead of individual. You as an employee may have to purchase your own disability insurance, and going with a group plan will generally cost you significantly less than an individual disability insurance plan. The premiums that you or your employer will pay for coverage vary depending on the dangers that are present in your place of employment. If you work in an office setting, your premiums are going to be less than if you worked around dangerous chemicals or operated heavy machinery. The benefits that you receive from a disability insurance payout are not able to be taxed if you paid the premium. If your employer paid the premium, then your payout is taxable.
You may find, like most people, that individual disability insurance plans, while more flexible than group plans, cost much more than can reasonably be afforded. An individual plan could allow you to receive a payout for a disability that was incurred during the course of one job and continue even if you are earning income through another job. There is often a waiting period with individual disability insurance plans that can delay your receipt of coverage. Hopefully, even though you have an idea of coverage characteristics of disability insurance, you will not have to use it in your lifetime. While it is good to have this type of insurance, it is doubtful that you would enjoy the effects of suffering a disability or illness that can keep you from being employed.