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What does disability insurance cover?

What Does Disability Insurance CoverDisability insurance functions as a replacement for part of your income in the event you become disabled. It does not generally provide coverage for one specific expense or another.

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After what is known as the elimination or waiting period (a set amount of time after the disability) the disability insurance will begin paying a percentage of your income. This percentage is usually no more than 70% of your normal income.

These payments will continue for either the duration of your disability or until the time limit stated in the policy has run out.

Even if your insurance is included in your work, the disability does not have to be work related. In most cases, it cannot be work related, anyway. Work related disabilities will usually be covered by worker’s compensation.

Short Term Disability Insurance

Short term disability insurance will pay benefits anywhere from 13 weeks to two years after the disability occurs. Short term disability is also known most commonly as sick leave. People use this when they are injured, or when they have a child (claims because of pregnancy make up as much as 30% of the total claims). The ability to receive disability benefits for pregnancy has many specific limitations now covered in this article.

The typical policy will continue benefits for up to 52 weeks. Many employers provide this anyway, but five states require it. Employers must provide at least 26 weeks in the states of:

  • Hawaii
  • New Jersey
  • New York, and
  • Rhode Island

Employers in California are required by state law to offer 52 weeks.

The payment will usually be between 50% and 60% of your salary, if you get disability through your employer. However, supplemental and individual policies will usually offer higher benefits, sometimes up to as much as 80% of your income.

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Long Term Disability Insurance

No short term disability insurance policy will cover 100% of your income, out of the fear that there will be no incentive for you to ever to return to work (at least not until your sick leave has officially run out). The truth is that when you are ill, the costs are even higher, so that 50- to 60% may not stretch as far as it would if you were not ill.

Long term disability kicks in after your short term disability has run out. No states, however, require your employer to offer this type of insurance. Many people opt to purchase their own individual policies or to supplement their existing policies. Your benefits will not ever be taxed if you pay the premiums yourself.

Before you buy long term disability insurance, you will want to find out for sure how long your short term disability will pay, should you have such insurance in place. Some long term disability insurances have a short waiting period, which would be silly to pay for if you have a short term disability insurance policy that will cover you for 52 weeks.

For some people, it does not make sense for them to purchase disability through their work—or it is not even available. Individual policies are the best option for them. Some people also choose to supplement their group policy because they do not like the idea of trying to live off 60- to 70% of their incomes, and individual supplemental policies bought from a private carrier will let them insure up to another 20% of their incomes.

Others choose to purchase High Limit Disability Insurance, which allows them to get coverage for their higher salaries (six-figures) which would not happen with a group plan.

Why get disability insurance if my employer already offers it?

Honestly, many suggest purchasing your own individual policy even if your employer does provide it, if you can afford it. Your own policy will offer more comprehensive benefits, as well as more of the benefits you want in the first place. You can take your policy with you, regardless of where you work. Also, many say that it is easier to sue if the company that holds your individual policy delays or denies your benefits; there is much longer process with group plans.

Use free online quote tools like the one found on this page to quickly get an idea of the types of rates you can get on various disability insurance plans. Some estimates say that a disability causing accident occurs every second. At any rate, disability happens far more often than most people expect, and definitely more often than most people anticipate for. Think about what you need to protect—your family, your home—and then decide what disability insurance plan is right for you.

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