Everyone insures their health, car, and home but forgets to insure their income. If you are sick or injured and cannot work, how would you continue paying your bills? This is where disability insurance can help. It replaces part of your income when you cannot work because of a medical condition.
Let’s get a closer look at what disability insurance is, who should have it, and what to look out for when selecting a plan.
What Is Disability Insurance
Disability insurance is another kind of protection that pays you monthly if you get too ill or hurt to work. It does not pay for medical expenses like health insurance does. Instead, it helps keep your income safe so you can continue to pay for necessities such as rent, groceries, and electricity.
There are two primary forms:
Short term disability insurance
Pays you for a few weeks to a few months, typically a maximum of six months. It is generally applied for recovery from surgery or giving birth.
Long term disability insurance
Pays you for an extended period occasionally years according to your policy. It is intended for more severe health conditions that render you unable to resume work for an extended period.
What Does It Cover
Disability insurance usually pays for a broad range of conditions such as
Back injuries
Mental illness such as depression or anxiety
Cancer
Heart disease
Accidents and surgeries
Pregnancy complications (short term plans)
Every policy differs, and no health issue is covered by default, so be sure to read the fine print.
Who Needs Disability Insurance
Many people think they do not need this coverage unless they work a dangerous job. But the truth is that most disability claims are due to illness, not injury.
You may need disability insurance if
You rely on your income to pay monthly expenses
You are self employed or a freelancer with no employer-provided benefits
You do not have enough savings to cover months without a paycheck
You have a household that relies on your pay
Even individuals with coverage through an employer may find it useful to purchase an additional policy to enhance their coverage.
How Much Does It Cost
Disability insurance cost varies based on your age, employment, health, and the coverage you desire. On average, you can expect to pay one to three percent of your yearly income. As an example, if you have a yearly salary of fifty thousand dollars, your disability insurance may range from forty to one hundred twenty five dollars monthly.
What to Look for in a Policy
Below are some terms you should know:
Benefit amount
The amount of money that you will get each month if you can’t work
Elimination period
The waiting time before you receive payments, typically thirty to ninety days
Benefit period
How long the payments will continue it might be two years, five years, or until retirement
Own occupation vs any occupation
Own occupation is where you are covered if you can’t do your particular job
Any job means you have to be incapable of working at any job in order to be eligible for benefits
Final Thoughts
Disability insurance is one of the most underappreciated but vital forms of coverage. Your capability to earn a living is your greatest asset and insuring it is good business sense. Regardless of whether through your company or a personal policy, having protection in place can be reassuring during life’s unexpected setbacks.
