Basics of Short term and Long Term Disability Insurance Plans

Basics of Disability Income Insurance

You might have not thought that you are more likely to experience a disability during your working years than to depart this life during the same time. An accident or illness are unexpected and can hit you anytime. This means that Disability insurance is as important as life insurance.

Disability income insurance is a kind of insurance that provide income protection at a stage when working is not possible due to some disability. Disability insurance companies summarize the definition of disability in different ways. A most common definition defines disability as a state that prevents you from performing the major duties of your profession.

Types of Disability Insurance Plans

There are two types of disability insurance plans one can have:

  • Employer disability insurance plan
  • Personal disability insurance plan

There is a misconception that Employer-paid group disability policies are better to individual or personal policies. However, in fact one lose the insurance coverage on leaving the current employer, moreover the benefits you received are regarded as income and thus taxable too. If you buy a personal disability insurance policy, you just have to pay the premium; you own the policy and benefits are rewarded to you directly. There are two types of disability insurance:

  • Short term disability insurance and
  • Long term disability insurance

Short term disability insurance can benefit you during the initial weeks of a disabling illness or accident where as Long term disability benefits you after those initial weeks, for an extended period. One can have one or both of these policies from employer or can purchase their individual disability insurance on their own.

Disability Insurance Policy

There are many policies available that can offer assistance to people with disabilities. These policies are likely to differ in some areas. One must go through to these areas carefully before purchasing the disability insurance policy:

  1. Disability insurance companies generally use two definitions of total disability, which are "own occupation" and "any occupation". The policies which use the own occupation definition are considered best as they judge you totally disabled if you're incapable to continue working in your actual occupation while if your policy uses "any occupation" definition then earning from another activity can offset your insurance benefit.
  2. Buy a policy that pays residual disability benefits. They are not same all the time, so check it out whether it uses an income definition or a duty or time definition of residual benefits.
  3. Pay attention to waiting period, length of time and the way disability is defined in the policy as you will notice significant differences among disability insurance policies.

You must have worked for at least 10 years in a job, in which you must have paid social security taxes to be eligible for disability benefits. Disability income insurance provides you financial security until you get well and return to work.

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barryrutherford profile image

barryrutherford 6 years ago from Queensland Australia

Right would be interesting to know what the premiums are like in the United States compared to Australia.

Kevin Peter profile image

Kevin Peter 3 years ago from Global Citizen Author

Hi barry,

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