What Type of Disability Insurance is Right for Me?

Insurance is a contract between two parties, the insurance provider and the customer (individual or business) to provide financial security from loss, damage or theft. Insurance is a type of hedge against risk and uncertainty of financial loss arising from any accident or disaster. 

When you take out an insurance policy, you pay monthly premiums to cover your losses should they arise. In case of any incident which results in loss, damage or theft you can make a claim with your insurance provider, the company will then cover your financial loss to the extent agreed in the insurance contract. Insurance companies pool the money of all the policy holders together and make the payments from this pool as and when needed. 

You can find an insurance plan for virtually anything, most common type of insurance plans include health insurance, auto insurance, disability insurance and home insurance. Some products come with theft insurance, exporters and importers are required by law to provide insurance for their goods.  Some plans are voluntary whereas some plans are compulsory by law. 

For the purpose of this article we will focus on disability insurance in detail, but you can also quickly see if you are eligible for up to $2,000 per month for disability insurance here.  It usually only takes a minute to qualify.

What is Disability insurance?

Disability insurance provides a stream of income to the insurer in case of any accident or illness which results in any sort of disability that prevents the person from working. For example any accident may impair the usage of hands for a person whose duty involves operating computer or writing, any illness may result in psychological disorders which may result in physical disability to do work due to the inability to maintain composure etc. 

In any such case which meets the criteria for disability insurance, the insurer or the beneficiary of the policy will receive monthly payment in the form of sick leave, short term disability benefits and long term disability benefits. Disability insurance enables the insurer or the beneficiary to maintain their standard of living and meet their monthly expenses. Disability insurance covers 40-60% of the insurers gross pay, the monthly payments are tax free because the insurer used after tax savings to buy the insurance policy. 

The monthly premiums for disability insurance vary, they start from 1.5% of gross income and go up to 3.5% or even 4% of the gross income. Disability insurance plans include a period termed as “elimination period”, this is the period of time for which the policy owner must wait before they are eligible to receive the monthly payments for disability. If the disability is removed before the elimination period is over, there will be no payment for disability. 

Different Types of Disability Insurance

 There are two basic types of disability insurance.

  • Short term disability insurance: Policy owners are covered for a portion of their income, for their disability for a period of three to six weeks.
    • State Disability Insurance: This is a short term disability insurance offered by some states. The benefits are available usually for one year.
  • Long term disability insurance: Policy owners are covered for a portion of their income, for their disability for a period over six months.
    • Mortgage Disability Insurance: is a type of long term disability insurance, it covers your mortgage payments in case you are not able to work due to any accident or illness. 
    • Personal Disability Insurance: is a type of long term disability insurance, it covers the loss of income in case the policy owner is disabled from continuing work due to any accident or illness. 

Other types of disability insurance.

  • Business overhead expense disability insurance: This insurance plan covers the overhead expenses of a business in case the owner becomes ill and cannot continue to run the business. 
  • Workers compensation: This insurance policy is compulsory by the state for the employer to offer to the employees. This insurance is only triggered if the worker is injured at work, it does not apply to any disability sustained outside work.

Obtaining a Disability Insurance Policy

Before you decide to purchase a disability insurance policy you must make up your mind about the type of policy you want. Is it long term or short term? The main difference between a short term and long term policy is that of its duration and monthly payment. Short term policies are for, the short term as the name implies and they cover up to 80% of the gross pay whereas long term policies are for a period over one year and cover up to 60% of gross pay. Once you have decided which type of policy you want then you can proceed with your application with the insurance provider of your choice and consider other aspects of the policy you are about to take.

You will have to decide you much coverage you require, most people choose about 60% coverage of their gross pay, the higher the coverage, the higher your premium will be. ^0% coverage is where the costs and benefits balance out. Then you will have to choose the coverage period, this is the amount of time for which the benefits will last. People can choose 3 years, 5 years or coverage of benefits till your retirement. Most people go for a period which covers them till their retirement. 

You`ll also have to decide the elimination period, once again most people keep it around 90 days, as at this point the costs and benefits balance out. The shorter your elimination period, the higher the cost will be. Once you have filled out your application, you may get a call from your insurance provider for a short phone interview to confirm the details you have put in the application, you will also be asked about your health and any pre existing conditions. Following this short interview, the insurance company will set you up for a medical exam and confirmation of your income. Once the insurance company has carried out its due diligence process, you will get your disability insurance policy.

Private Policy Benefits

There are numerous benefits of private health insurance over public health insurance. First and the foremost being that you get to skip the long waiting lists for medical treatments. This can be particularly useful when the police owner needs to have an elective surgery. Under a compulsory policy, elective surgery can take a long time but private policy owners can skip the waiting line. Another benefit of private insurance policy is that you get to opt for a private room. Public policy holders are treated in public hospitals and are usually kept in a ward with other patients, private policy holders are treated in private hospitals and can opt for a private room without other patients. One more benefit which private policy owners can avail is that they can cover those aspects of health and medical which are not covered by state health insurance such as dental and optical treatment, chiropractic and psychological treatment. 

However, private policy carries a premium which is approximately 1.5-3% of annual pay. But having a private policy in addition to a state offered policy can come handy in times of medical emergency.

See if you qualify for eligibility here which you could get as much as $2,000 per month.

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