Disability Insurance

Have you ever thought about what would happen to you if you were suddenly physically unable to work? Although nobody likes to think about it, the possibility of disability is one that can strike when least expected. According to the American Council of Life Insurers, the harsh reality is that one third of all Americans between the ages of 35 of 65 will become disabled for more than 90 days. In addition, one in seven workers will be disabled for more than five years.

A major misconception about disabilities is that many people tend to think they are caused by freak accidents. The truth of the matter is, the majority of long-term work absences are often due to serious illnesses like cancer and heart disease.

Without disability insurance, you are faced with a possible loss of income, which can be devastating to the financial stability of a household. The U.S. Department of Housing and Urban Development states that 46 percent of all home foreclosures are caused by some type of disability. To prevent such an unfortunate event from occurring, it is important to explore your disability insurance options.

What Does Disability Insurance Do?

Disability insurance is designed to replace a portion of your income should you become disabled and are no longer able to work. Employers typically offer group plans that will replace up to 60 percent of your salary in the event of a disability. There are also common supplemental plans and individual disability insurance polices that can cover as much as 70 to 80 percent of your income.

Disability insurance benefits are slated to last for a set number of years, or until the insured person reaches retirement age. Benefits generally stop around retirement age, based on the notion that once you retire, you will no longer be dependent on your work-related income.

If the premium for disability insurance is paid out-of-pocket by an individual, then benefits are tax-free. This would mean that the employer does not cover the premium costs.

Long Term Disability Policies

The availability of long-term disability insurance policies can vary to a great extent. There are a number of top-notch policies that pay benefits when the individual needs them, but there are also plans that hide a lot of loopholes. It is important that an individual seek out the best possible plan for their personal needs, as opposed to simply choosing the least expensive policy. The cheapest plans often have very strict definitions of disability, which in turn makes it difficult for you to claim benefits over several years. Unfortunately, this is typically true for both individual and group disability insurance plans.

Group Plans

The first thing you should do upon accepting a new job is to find out whether or not your employer provides long-term disability insurance. Approximately half of mid- to large-sized companies in the U.S. today offer benefits that last for a minimum of five years, according to America's Health Insurance Plans, an industry lobbyist. If you are lucky enough to have this type of coverage, it unfortunately may not meet all of your individual needs. Therefore, it is important to be fully educated on the precise amount of disability insurance you will need, and decide if your employer's plan is sufficient for you.

The typical group plan covers up to 60 percent of your income. Keep in mind, this amount is offset by any other benefits you may receive from social security or worker's compensation insurance. Also, most group plans have a benefit cap of up to around a maximum of $5,000 a month, or $60,000 a year. Company bonuses are also not always included, as a typical group plan will only insure one's regular salary.

Individual Plans

If you are self employed, or otherwise not covered by your employer, it makes the most sense to purchase an individual disability insurance plan. Make sure the level of coverage you do have is enough, otherwise, you may need supplemental insurance. After all, most people may not be able to afford living on just 60 percent of their salary. What an individual plan will do is ensure at least another ten to twenty percent (10-20%) of your income. In some cases, you may be able to get individual coverage for a six-figure salary and a bonus - an option that is fairly unattainable with a group plan.

Short Term Disability Insurance

Short-term disability insurance differs from long term in disability insurance that it goes into effect as soon as you are unable to work due to an illness, injury, or birth of a child. Most employers commonly provide some type of short-term disability insurance coverage. This type of coverage ranges from as little as a few days to as much as one year. In many cases, the number of weeks you are eligible for the short-term disability insurance benefit is based upon how many years you have worked at the company. The longer you are employed at a company, typically the more paid sick leave you will be eligible to use.

Most states require employers to provide short-term disability insurance. States such as Hawaii, New Jersey, New York, and Rhode Island mandate that most employers must provide at least 26 weeks of coverage. California is the only state where employers are obligated to offer 52 weeks.

If you decide to purchase an individual long-term disability insurance plan or one that will supplement your employer-based insurance, be sure to first find out how much short-term disability coverage you have from your employer, if any.

If you are a contractor or employer who needs to purchase group disability insurance, or you are in individual in need of disability insurance or supplemental coverage, contractorsinsurance.org is the service to use. We can help you find excellent, reliable coverage for the right price. For more information about disability insurance, click for a free quote or call our contractors insurance specialists at (516) 294-1072 today.