Why Get Disability Insurance?
Disability insurance compensates a portion of your income when you can’t work, and can help you in paying for expenses such as food, utilities, and home and car payments. Disability insurance is important if you or other people (like your family) rely on your income.
If you and others depend on your income
Disability insurance is important if you or other people (like your family) rely on your income. Social Security disability benefits can help in the long run, but aren’t available unless your disability affects you for more than a year.
A good rule of thumb is to protect 60-80% of your after-tax income
You should look for a disability policy that will cover all of your essential costs of living, which is usually 60% or more of your after-tax (not your gross) income. Social Security payments alone may not be enough to support you.
Find out how much disability insurance you get at work
Both Short Term and Long Term Disability insurance coverage may be offered through the benefit package your employer provides. If disability insurance is provided, you should examine your plan to find what the disabled benefits are and when they can be used.
You need it even if you’re young and healthy
Twenty-five percent of 20 year-olds will experience disability before the age of 67. Disability insurance costs less and is easier to acquire if you are young, healthy and working.
Consult a financial professional or do your own online research to determine how much disability insurance you might need.
The financial strength of the insurance company you buy from matters
Disability insurance policies are long-term contracts between you and your insurance provider, so ensuring the financial health and stability of your insurer is crucial. Most insurers are rated by A.M. Best or other national services and you can find that information online.
What Alternatives to short-term disability insurance?
Short Term Disability Insurance can only be provided by an employer. If you can’t get a Short Term Disability Plan, an emergency savings fund that contains between three to six months salary is the best substitute.
Where do I buy disability insurance?
Long-term Disability insurance can be acquired through your employer or directly through a number of insurance carriers. If you can’t get long term insurance through your employer, national insurance carriers will typically provide you with an individual policy.
Short-term Disability Insurance, on the other hand, is only available from your employer. Your employer’s human resource department can notify you whether or not short-term disability policies are provided by your company.
What exactly is short-term disability insurance?
Short Term Disability Insurance is intended to provide income replacement when injuries (a bad back, for instance) or medical treatment (surgery, for example) keep you from working for a period of one to six months. Since the amount of income replaced and the definition of “disability” differs from plan to plan, premiums for Short Term Disability Insurance vary substantially.
How is it different from long-term disability insurance?
Both short-term disability insurance and long-term disability insurance provide money for people who are unable to work..
Short terms disability insurance begins after the established “elimination period” (how long you have to be unable to work before claiming disabled benefits) and only covers the first initial weeks or months of disability. It’s intended to help you get by when you can’t work due to an injury or medical problem that keeps you out for a few months.
Long term disability insurance begins three to six months after you file for disability and can last years. It’s intended to be a long term replacement for lost wages. The money can pay for monthly living expenses such as food, clothing, and house payments.
If you have both a short-term policy and a long-term policy you can only receive benefits from one policy at a time.