Short & Long Term Disability Insurance
Short and Long Term Disability Insurance Defined
You work hard to build a life for yourself, and it's only natural that you want to protect that. Most likely you protect your home, car and family from the unexpected with the appropriate insurance plans. What about your income? If you were suddenly unable to work due to an injury or illness, could you maintain your current lifestyle? How long could you pay your mortgage and bills?
Short term and long term disability insurance can protect your financial well-being by replacing lost wages if an illness or injury prevents you from working. Some employers offer disability insurance plans. If your employer does not offer this coverage, or if you are self-employed, you can buy personal disability insurance. Contact an independent Trusted Choice® member agent to learn how to protect yourself and your family in the event that you are unable to provide for them due to an illness, injury or disability.
Disability: Not Something to Leave to Chance
According to the Council for Disability Awareness:
- The average worker has a 30% chance of becoming disabled
- 12% of the population receives disability benefits
- One in 8 workers will be disabled for at least five years during their working years
What Does Short Term Disability Insurance Cover?
Short term disability insurance provides coverage for a limited amount of time. You receive benefits after a short waiting period of up to 14 days. You are then covered for the length of time specified in your policy, which can be from several months up to one year.
Your policy will also indicate a maximum coverage amount. You will receive benefits until you exceed the policy’s specified time limit or maximum coverage amount, or until you recover. Short term disability insurance policies pay out benefits for reasons such as the following:
- A lengthy illness
- A disabling injury
- The birth of a child
What Does Long Term Disability Cover?
Long term disability insurance covers injuries and illnesses that prevent you from working. It does not cover child birth. It provides coverage over a longer time period than short term disability coverage.
The Council for Disability Awareness lists the most common long-term disability claims as:
- Musculoskeletal/connective tissue disorders (back pain, osteoarthritis)
- Cardiovascular/circulatory disorders (heart attack, coronary artery disease)
- Mental disorder
If you experience a debilitating injury, you may have a longer waiting period before receiving benefits. Long term disability claims normally take up to 90 days to process, sometimes longer. After your claim is settled, you can receive benefits for several years, until you reach age 65, or until you recover. Some policies pay benefits for the rest of your life, although this varies by policy and by insurer.
Which Type of Disability Insurance Is Right for You?
It is important to protect your income, but choosing the right policy can be tricky. Just as it is impossible to predict an illness or injury, it is also impossible to know how long it could keep you out of work, or if you will be able to return to work at all. Thus, it can be difficult to select the right policy, since you must make decisions based on hypothetical situations.
One notable difference between short and long term disability insurance is that short term disability insurance premiums are much cheaper than long term premiums, since the payout isn’t as large and the coverage does not last as long.
Long term illnesses and injuries can devastate your personal finances. You may have enough savings to weather a month’s reprieve from work, but a three year battle with cancer can drain resources quickly. If you must choose between long and short term disability insurance, you’d be smart to adopt a long term disability policy, which offers significantly greater financial protection. Ideally, the best choice for most consumers is a combination of both.
What Do Disability Insurance Companies Need to Know?
When you’re getting a disability insurance quote, you may need to provide information to your insurance company that you may not have had to provide for other types of policies. Your age and health status are the two primary factors that determine the cost of premiums. If you’re purchasing disability insurance services from a private company, you may even need to take a medical exam.
The insurance company may ask you to provide extensive information about your medical history in an effort to understand your risk factors. Your occupation and income are also factors the insurance company will request in order to determine the appropriate amount coverage for you.
How to Buy Disability Insurance
Your employer may offer both short term and long term disability insurance as part of your benefits package. While some employers may pay for the entire premium, others deduct some or all of the premium from their employees’ pay. Alternatively, the employer may pay for coverage up to a certain limit and allow the employee to pay extra to upgrade coverage. For example, an employer may pay for a short term disability policy that provides up to $10,000 in coverage, but may let the employee choose a $20,000 policy by paying the additional cost out of pocket.
An employer-provided disability plan is the default choice for many people. It is important to be aware that employer-provided plans pay only 60 to 70 percent of your income. Choosing a plan of this type may leave you with less to live on at a time when you have additional expenses such as home health care or rehabilitation.
It is also important to know that bonuses and commissions are not included as income in your disability compensation. Employer plans may also have monthly and/or annual caps, and if you leave the company, your policy may be canceled. If you are concerned that you may not be fully covered in the event of a challenging event in your life, consider contacting an indpendent agent to learn how to augment your disability coverage. You can find a local independent agent in the Trusted Choice network, right in your area.
Questions to Ask Your Insurance Company
When you are seeking information about disability insurance, be sure to ask questions in order to fully understand what you're getting. Some questions you may want to ask include:
- What constitutes a legitimate claim? It’s essential to understand what benefits you’d receive. Some insurers provide coverage for accidents, but not for illnesses, even though illnesses are the leading cause of long term disability.
- Can my policy be adjusted without repercussion? If you decide you need additional coverage, you might have to go through a medical evaluation again. If your health status has declined, you may end up paying higher premiums. Ask your agent about add-on coverage so you know what to anticipate in the event of this scenario.
- What is my specific waiting period? Your waiting period for receiving benefits will affect your overall premium. It will also help you determine how much money you should save up to cover your cost of living during your waiting period.
- Is my coverage occupation-specific? Some policies provide benefits if you can’t physically or mentally perform your job. This is known as an “own-occ” policy. Other policies only provide benefits if you can’t perform any job that fits your education and experience. This is an ”any-occ” policy. In general, own-occ policies are preferable to most consumers than any-occ policies. This is an important issue to discuss with your agent when exploring options.
- What incentives are offered with my policy? If you’re disabled, returning to work may be a challenge. Some policies offer programs that help you reacclimatize to the work arena and take control of your daily life.
Choosing a Disability Insurance Policy
It doesn’t matter how old you are or what your physical condition is. Injury and illness can create enormous financial challenges. If you’re unprepared, even a short term disability can cause a huge financial strain. But when you have short and long term disability coverage, you have a back-up plan in the face of the unknown.
Contact an independent agent in the Trusted Choice network, in one of over 27,000 locations nationwide, to start your customized search. A local member agent can save you time and money by helping you to compare quotes from multiple short and long term disability insurance carriers so you can find the right plan to meet your needs.
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