Disability Insurance to help minimize your financial loss

'Disability' as meant in the insurance policies is a condition (often caused by an accident or a critical illness) that keeps you from doing your regular office related work. Disability insurance helps you protect your income even when you become incapable of earning. When you are the only source of income and others depend on you, it is best that you get a disability insurance considering the fact that disability may arise any time and for many reasons.

Disability insurance can be taken for a long-term or short-term. A long-term disability insurance (LTD) coverage may begin after a waiting period (the period between the day of claim and the day of receiving the benefits) of 90 days from the onset of disability and continue till the time the disability lasts. A short-term disability insurance (STD) has a shorter waiting period and provides benefits on a weekly basis. They are usually sold alongside a long term disability policy.

Disability insurance is primarily of 3 types:

• Social Security Disability Insurance (SSDI): This is a federal government provided insurance policy for workers who have a disability that has been diagnosed to last for 12 months and that does not allow them fruitful employment. Social Security offers long-term disability insurance only. There must be medical evidence to prove the disability. There is a Social Security Administration (SSA) medical listing that the candidate must match. If not then his residual working capacity is taken into consideration.
  
  If you are enrolled under Social Security Disability Insurance you may receive social security disability benefits at any age, provided you have paid the social security taxes and have serious physical or mental condition that results in a disability to earn your wages. The benefits include:
  • Monthly wage
  • Medicare
  • Vocational Rehabilitation (if the policy permits)
  • Other employment support programs
• Employer-Provided Disability Insurance: Several companies provide group disability insurance as part of employee benefits. Individuals receiving long-term disability coverage are given benefits of up to 60% of salary and the service may be given for 5 years to the time an individual reaches the age of 65. In some cases this may extend to lifetime benefits. If your employer pays your premiums then you have to pay taxes as levied on the benefits received.
  
  
• Individual Disability Insurance: Individuals who are self-employed and desire disability coverage may get policies from private health insurance companies. These policies are comparatively more expensive than group disability insurance provided by employers. Premiums and benefits may largely depend on the occupation, State and Country. With private disability insurance a worker may expect to have 50% - 70% of his income compensated.
  
  

There are again two protection features of disability insurance:

Non-cancelable: Purchasing a non-cancelable policy means that the insurance company cannot cancel the policy of a member except when there is non-payment of premiums. The advantage of such a plan is that the members may get the policy renewed every year with no increase in the premiums or no reduction in benefits.

Guarantee renewable: With this clause, the member can get his policy renewed and have the same benefits as before. However, the insurance company reserves the right to increase premium rates which is applicable to all other policy holders within the same class.

This kind of a benefit may be applicable if an employee is partially disabled. This means that the individual cannot perform 80% of his normal work duties. In such a case the insurance plan provides for the 80% disability he is conditioned to and not for the 20% work that he can actually do.

Eligibility for disability insurance benefits is dependent on certain factors. They are:

• You have not been able to do your regular work for a period of 8 (minimum) consecutive days as a result of disability.
• You have employment when you claim for disability.
• If you have been unemployed, you must be actively job hunting.
• Your disability has caused you to lose wages.
• Your earlier wages accumulate to at least $3000.
• You have a licensed doctor or accredited religious practitioner treating you for the first 8 days of your disability. Benefits will be given only if you continue to remain under treatment.
• You must have made your claim within the time frame specified in the policy.
• You have a complete medical certification from your doctor stating your disability. In case you have gone through childbirth, a licensed midwife, nurse-midwife or a nurse practitioner may provide the certification.

Disability can be claimed if:

• A disability arises due to unpredictable conditions. This means that your disability is not from an earlier known medical condition or a chronic illness.
  
  
• You have a disability while you are at work and the disability arises as a result of any work related issue.
  
  
• The waiting period is over.

Benefits received from employer provided disability insurance as well as SSDI are:

• Tax Benefits: If the premiums are paid by you using post tax dollars, then you need not pay any tax on the benefit amount.
  
  
• Discounts: While there are employers who offer insurance at a discounted rate, there are others who offer short-term insurance for free and at the same time give employees the option of choosing long-term insurance on discounts.

Benefits are paid one month in arrears. An individual may receive benefits as long as he/she continues to be disabled or meets eligibility requirements. The beneficiary will, however, be reviewed to see if there is any improvement in the condition. This will in turn determine whether he/she still is eligible to receive the benefits.

If you can anticipate the probability of being disabled due to any reason, it is best that you get yourself covered under the disability insurance policy. Ask your agent to explain the policy to you in details. Sometimes a general policy may not cover a critical illness. Purchasing add-on policies at times like these always help. So assess your risks and invest for your future.