What Would You Do if you Couldn't Work?
For most people, an injury or illness means loss of wages. Without disability insurance, their only compensation will come from Social Security, assuming that they're eligible. Social Security pays an average benefit of less than $1,130 each month--hardly enough for a family to live on, so obviously more of a safety net would be helpful. That's where disability insurance comes in.
The basic types of disability insurance are:
Group Disability Plans: In insurance, it's always cheaper to go with a group plan, such as one offered through an employer. The downside is that such plans usually only pay about 60 percent of one's salary when they get injured and they often have relative short limits on how long or how much they will pay.
Individual Disability Plans: These plans are often used if an employer doesn't offer disability insurance or if someone wants a plan that is portable between jobs. The rates are based on health, so the younger and healthier someone is, the less they pay.
Supplemental Disability Plans: Since group plans and Social Security often do not offer enough disability coverage for someone to live comfortably, a supplemental disability plan can be a good way to bridge the gap. For a relative low cost, such a plan could raise a benefit amount from the 60 percent a group plan may offer to a more comfortable 80 percent.
Within any insurance plan, there are limits, variations and exclusions, so one would be wise to read the fine print. For instance, it is always a good idea to make sure that a policy cannot be canceled and renews automatically as long as the premiums are paid on time, as well as giving the flexibility to add more coverage in the future without another physical. It is also important to make sure that a disability plan is based on your "own occupation coverage," meaning that a person receives benefits if they can't do their job rather than receiving benefits only when they can't physically do any job.
Options to Consider
There are some interesting options available on disability insurance, as well. If one has a lot of sick time or other paid time off to use, they might be able to save money on their disability insurance by using a long waiting period of 90 to 120 days before the insurance kicks in. Some disability insurance plans allow contributions to retirement plans or pay benefits past the age of 65, essentially becoming part of the retirement package.
Disability insurance should be part of the insurance picture for anyone who is employed and could not afford to survive without their pay check. With all of the varieties and options available, just about anyone should be able to find disability insurance that is right for them.