Individuals purchase health insurance, car insurance, and life insurance, but often overlook disability insurance. However, this type of coverage protects their income, which is actually their greatest asset. Disability insurance replaces part of a worker’s income if they cannot work due to an injury or illness.
This insurance provides the worker with financial security. The worker knows they and their family will be cared for, as the funds from the insurance policy can be used for any purpose. However, the worker must understand how this type of coverage works and determine whether they need short term or long term disability coverage.
Table of Contents
How This Coverage Works
When a person purchases disability insurance, they pay monthly premiums. In exchange, the policyholder receives monthly benefits if they are injured or become ill on the job and cannot work. The insurer replaces a percentage of the worker’s pay so the worker can meet their financial obligations as they recover from the illness or injury.
What is Covered?
A disability insurance policy covers any injury or illness that prevents the worker from carrying out their normal job duties. In fact, the CDC reports one in four American adults has a disability. Long-term disabilities may involve arthritis, back pain, cancer, and stroke, along with many other common conditions. In fact, most long-term disability claims are the result of a medical illness. Many people do not realize this and think disability insurance will be of no benefit to them. They are mistaken.
In addition, many people believe they will be eligible for social security disability. They don’t realize how often people are denied this coverage. That leaves the individual with no way to pay their bills.
Reading the Policy
When a person goes to buy disability insurance, they need to read the policy carefully. This document will include the premium amount and outline what is considered a disability. When reading the policy, see if the insured can work a different job and bring in less pay while receiving benefits. Some insurers allow this when the worker cannot engage in their normal job activities but can be employed in another position. Certain policies say a person cannot work in another profession, regardless of how much they are paid, and receive any benefits.
The policy also spells out how much the insured will receive in benefits. This is typically a percentage of the worker’s income, with most policies paying between 60 and 80 percent of the worker’s salary while they are disabled. In addition, learn how long the benefits will last. That information should be included in a policy.
Who Needs Disability Insurance?
Every worker should consider investing in disability insurance, particularly those who rely on their income for regular expenses or parents with young children still at home. As the rate of disability is quite high today, a person cannot risk their financial future to save on monthly premiums. A short-term disability could erase a person’s savings and put them at risk of losing their home, car, and more. The disability insurance reduces the risk of this happening.
Every person needs to think about what they would do if they couldn’t work for several months or years. How much money do they have saved if something like this happens? Countless individuals live paycheck to paycheck and couldn’t survive a month without a reliable income. Disability insurance insures a person is covered when the worst happens. It’s always best to be prepared for any eventuality, so learn more about this type of coverage today. If the coverage is ever needed, the insured will be glad they took this step.
