Disability can affect people in many different ways, from short term inconvenience to long term suffering. Although no one wants to think about becoming disabled, it is a current reality for 20% of the people living in the United States right now.
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More than half of the people who are disabled are considered severely disabled, causing even greater grief and substantial hardship. If you do not have disability insurance, you should buy disability insurance to protect your financial assets in the event you become disabled.
Loss of Income Due to Disability
There are many definitions of disability as not everyone has the same level of severity when it comes to disabilities. Nor do people become disabled in the same way. Some people are born disabled, others have accidents. Many people suffer with short term disability while others have a long road of recovery and possibly a lifelong disability.
People who become disabled due to an accident may have auto or health insurance that will help cover some of the medical bills. People who are injured at work may have group health insurance or private health insurance to help relieve medical expenses. However, the cost of diagnosis, treatment, and recovery is only one financial aspect of the disabled person’s situation.
When someone becomes disabled, whether short term or long term, they are unable to work. When you are unable to work due to a disability, your income stops but your expenses continue. People who have no disability insurance have the added burden of dealing with the financial ramifications of lost income instead of focusing solely on their recovery.
Long Term Disability and Short Term Disability
Short term disability is any disability that lasts up to one year. This means if you are injured but able to return to work in less than 365 days and you have short term disability insurance, then you are covered by your insurance. If your injury leads to a disability that takes longer than 52 weeks, then you will need to have long term disability insurance in order to provide for you during the remainder of your care.
In almost every situation, short term disability insurance will apply automatically for the first year of unemployment and then long term disability insurance takes over. For this reason, some employers will offer short term disability but not necessarily have long term disability insurance in place.
Both short term disability and long term disability are frequently provided through an employer. Some employers pay for the disability as an employee benefit while other employers offer disability insurance as an employee paid option. In either case, if an employee has disability insurance and he becomes disabled he will receive some type of income during his time away from work. The amount of salary and the length of the disability allowance vary by plan.
The Benefits of Disability Insurance
The benefit of disability insurance is in the fact that the disabled person will receive a paycheck even when she or he is unable to work. Since expenses do not come to a halt when a person is disabled, income is still needed to pay for basic necessities such as food, rent, and utilities. Almost half of all foreclosures are the result of a disability due to the person being unable to afford the mortgage while he is unable to earn an income. Disability insurance provides that person with a percentage of the previous salary in order to help compensate for the loss of income.
Although the amount of the benefit depends on the disability insurance plan, typically short term disability pays as little as 50% of your weekly salary or as much as 70% of it. Half of your income, or even ¾ of it, is not substantial, but it does allow for you to re-budget your expenses and hopefully stay afloat during your recovery period.
Even though a disability is considered short term for up to one year, that does not mean that every plan covers short term disability for that entire length of time. Some short term disability insurance only covers 10 weeks while other plans cover up to 26 weeks. There are a few states that actually require 26 week short term disability coverage by law.
Long term disability insurance also pays a benefit of between 50% and 70% of your weekly salary. However, since it is long term it will pay for an extended time frame. Usually long term disability insurance kicks in after short term disability runs out, whether that is six months or one year later. The length of time that long term disability insurance will actually pay out benefits depends on the plan, but it can be as little as two years or as much as five years.
Not having disability insurance is a risk. Just like any insurance, you hope never to need it but you really want it if you ever do. Being without income even for a couple of weeks can put undue hardship on your financial lifestyle.
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