Short-term and long-term disability insurance
Without this type of insurance, for example, no construction site in the United States would open, or any other type of employment that could potentially cause harm to life and limb.
This type of insurance pays out a portion of one’s income if one is unable to work because of illness or injury. Short-term policies generally do not exceed two years. Long-term policies can pay benefits for several years or until the disability ends.
We hate to think about it, but we’re all at risk for disability.
An illness or injury can easily push us away from our jobs and income, and it doesn’t take long for monthly bills, mortgage payments and car payments to create a financial crisis.
A surprisingly large number of people will miss a large amount of work because of a disability. Based on the “Commissioners Disability Table, 1998,” almost one in seven people will miss more than five years of work because of disability. Approximately 50% of all mortgage foreclosures and nearly 20% of personal bankruptcies in 2001 were caused by disability based on health reports.
Given these scary statistics, it begs the question, how will you support yourself if you can’t work because of a disability? Fortunately, there are protections available in the form of disability and income (DI) insurance. Unfortunately, DI policies can often feel like they are written in a foreign language.
Keep reading as we show you how to translate a DI policy from legalese to English, so you can be sure when you sign on the dotted line. (Check out Explain Your Insurance Agreement to get started .)
Even seemingly minor ailments, such as broken bones and grunts, can lead to temporary or permanent disability. Any type of disability can have a disastrous effect on your earnings, savings and lifestyle. Thus, to protect yourself, you need to understand the basic features of each disability insurance policy
Long-term and short-term
Insurance companies provide both short-term and long-term disability insurance plans. Long-term DI insurance premiums when you are disabled for more than six months before you reach retirement age.
Typically, during disability, short-term coverage pays about 70-80% of your income, while long-term disability insurance will pay about 40-60% of your income. This insurance usually requires a full medical exam.
As a rule of thumb, DI policies should be purchased when you are young, since old age or poor health can lead to dropping coverage or higher premiums.
In a policy, premiums range from 1% to 4% of annual income, depending on your age, gender, and occupation. Coverage will vary depending on the job you do, your choice of benefits, and your budget.
If your work is more likely to result in disability, the policy will certainly be more expensive.