Disability Insurance: Do You Need It, And Ways You Can Save If You Do

Disability insurance is an important part of financial planning, but is this coverage really needed? The answer to this may be yes or no, depending on the individual and their specific circumstances. There are some things to consider before you decide to purchase this policy, to make sure you are not wasting your money on useless premiums. Determine what resources you already have that may be used to help cover any disability expense, and this is a step that many people commonly overlook, causing them to pay much more for a disability insurance policy than they should. Any benefits you have through your employer should be considered, and all employers offer workers compensation disability insurance because it is legally required. This only covers the worker if they are hurt on the job though. Many employers provide sick leave, and short and long term disability insurance through group coverage, and these policies will help cover any disability expenses at no or little cost to you. These resources will allow you to lower the coverage amount of a private disability insurance policy, resulting in large savings on this cost.

Social Security offers disability insurance benefits to workers who have paid into the social security system. The actual benefit amount is determined by your years of employment and the amount you have paid in over the years. Every legal employer must take social security taxes out of each paycheck for every single worker, and this is the amount used for determining benefits. To be eligible for benefits, you must meet all of the requirements, which are very strict. Your disability must have lasted at least five complete months and is expected to have a total duration of at least one full year or result in your death, and you can not perform work of any type because of this disability, instead of just your normal work. This is not an option in most cases, and it is better to find a private disability insurance provider.

Disability insurance can be divided into two types, short term and long term, and this implies to the length of coverage and the duration of the disability. Short term disability insurance generally covers a disability for the first six months, at the most. After this time period a long term disability insurance policy is needed for benefits. These policies cover your lost income at the specified percentage, or offer a flat rate per day or month, in the event that you become disabled and can not perform your usual occupational duties because of the disability. There are many different benefits and clauses that may be used, and it is important to read your policy very carefully so that you know what your coverage is.

Unless you have enough savings or cash to cover approximately one year of lost income if you become disabled, you are facing huge financial risks if you do not have disability insurance. This does not mean you have to pay huge costs for this policy though, and comparing disability insurance quotes can help you save big money.