Disability Insurance

All you need to know about Disability Insurance

The term disability insurance refers to an insurance plan that provides payment for a given period should a disabled individual become unable to work. As an employee, should you get sick or injured to the point that you can’t attend to your office duties, the plan replaces a portion or the whole income amount for a specified amount of time. Statistics from the Council for Disability Awareness show that at least one out of every four employees will encounter disability in their professional career. The plan is designed to replace any amount between 45 and 65 percent of the insured’s gross income.

Types of Disability Insurance

There are two types of disability plans: long-term and short-term. Short-term disability has a waiting period of a maximum of two weeks and provides benefits for no more than two years. Long-term disability, on the other hand, provides benefits for longer periods, sometimes even for a lifetime and has a waiting period of several weeks.

How Does Disability Policy Work?

Disability plans can be purchased privately through an insurance company or provided as an employment benefit through your company group health plan. Either way, if you are covered and happen to get sick or sustain injuries that keep you from working, you will file a claim and the insurer will replace the agreed percentage of your salary. The length of your coverage will depend on whether your policy is long-term or short-term.

However, sometimes, for a couple of reasons, insurers deny disability claims. If the disabling injuries or illness is not covered by your policy, an insurer can deny the claim. Also, employer provided disability plans have complicated procedures and rules, and are heavily regulated. Your claim may be denied if these rules and regulations are not completely adhered to.

Types of Coverage

There are two major types of coverage in disability policy, non-concealable and guarantee renewable. Non-concealable implies that unless the insured defaults payments, the insurance company cannot cancel the policy and the insured gets to renew the coverage without a reduction in benefits or an increase in premiums. Guarantee renewable means that the insured retains the right to renew the policy and enjoy the same benefits, but the insurer can increase the premium if need be.