Consider
what might happen if you suffered an injury or illness and
couldn't work for days, months, or even years. If you're single,
do you have other means of support? If you're married, you may
be able to rely on your spouse for income, but you probably also
have many financial obligations, such as supporting your
children and paying your mortgage. Could your spouse's income
support your whole family? In addition, remember that you don't
have to be working in a hazardous position to need disability insurance.
Accidents happen not only on the job but also at home, and
illness can strike anyone.
If you
own a business, disability insurance
can help protect you in several ways. First, you can purchase an
individual policy that will protect your own income. You can
also purchase key person insurance designed to protect you from
the impact that losing an important employee would have on your
business. Finally, you can purchase a disability insurance
policy that will enable you to buy your partner's business
interest in the event that he or she becomes disabled.
What do
you need to know about disability insurance?
Once you
become disabled and apply for benefits, you have to wait for a
certain amount of time after the onset of your disability before
you receive benefits. If you are applying for benefits under a
private insurance policy, this amount of time (known as the
elimination period) ranges from 30 to 365 days, although the
most common period is 90 days. Group insurance policies through
your employer will generally have a waiting period of no more
than 8 days for short-term policies that pay benefits for up to
six months, and 90 days for long-term policies that pay benefits
up to age 65.
You can
purchase private disability income
insurance policies that offer lifetime coverage, but they are
very expensive. Most people buy policies that pay benefits up
until age 65; however, two- and five-year benefit periods are
also available. Because many injuries or illnesses do not
totally disable you, many policies will offer a rider that will
pay you a partial benefit if you can work part time and earn
some income.
Where can
you get disability insurance?
In
general, disability insurance
can be split into two types: private insurance (individual or
group policies purchased from an insurance company), and
government insurance (social insurance provided through state or
federal governments).
Private disability insurance
refers to disability insurance
that you purchase through an insurance company. Many types of
private disability insurance
exist, including individual disability income
policies, group policies, group association policies, and riders
attached to life insurance policies. Depending on the type of
policy chosen, private disability policies
usually offer more comprehensive benefits to insured individuals
than social insurance. Individually owned disability
income
policies may offer the most coverage (at a greater cost),
followed by group policies offered by an employer or
association. Check with your employer or professional
association to see if you are eligible to participate in a group
plan. If not, contact your insurance broker to look into
individual coverage.
