What Is Disability Insurance?
The ability to work and earn a living is probably the most important asset for any employee depending on a paycheck for survival. In fact, all your future plans could be based on the assumption that you will continue to earn a paycheck at the end of each month until you retire. Unfortunately, this is not the case for many people – when you become unable to work because of illness or injury, disability insurance would really come in handy.
What is disability insurance and how does it work?
A disability insurance policy pays a monetary benefit to act as partial replacement of the income lost as a result of illness or injury. In most cases, disability insurance policies provide a fixed payment for a given period or a monthly payment for the entire benefit period. The benefit period refers to the period you are disabled from earning a suitable income. Disability insurance companies visit us usually pay 40 -75 percent of your pre-disability earnings.
How long will you receive benefits?
The benefit period could range from 1 year to age 65 and even for life in some cases. However, since disability insurance benefits are meant to replace a portion of the income an individual would otherwise earn, the benefits do not extend beyond working years for most people. Opting for a shorter benefit period could save you a lot of premium dollars, but a lengthy disability would be a greater financial risk than a short-term disability.
Definition of disability
Different disability insurance companies have varying definitions of disability. For instance, some policies will pay if you cannot perform the duties of your occupation, but others will only pay if you cannot engage in any kind of work, especially if you are reasonably qualified, and yet others will only pay for disabilities that arise from an accident. Note that illness is the most common cause of disability and its likelihood increases as you grow older. In addition, some policies only pay if you are completely disabled, while others may cover partial disability following a period of total disability. Click here to learn about TPD Insurance.
Do you receive your benefits immediately?
In case disability occurs, you would have to go through a waiting period (elimination period) before your benefits kick in. You can go for a waiting period of 30 days, 90 days or 6 months when buying your policy. Opting for a longer waiting period will save you money, but your decision should be based on the amount of savings you have as you would need money to meet your expenses during the waiting period. Read: Life Insurance To Pay Off Debt
Is disability insurance necessary?
If you have a job, disability insurance should be at the top of your priority list. Although the chances of disability may seem remote, statistics paint a different picture. A sudden interruption in income could have serious financial consequences, especially since most people have some kind of debt (mortgage or credit card bills) to pay off. It is also worth noting that the disability itself could be costly because of medical bills, modifications to your home or car and other unforeseen needs. With disability insurance, you can maintain a decent standard of living even in disability. Now you understand What Is Disability Insurance? after reading this article.