Disability Insurance Prevents Major Financial Problems

While no one wants to think about becoming disabled, it is a reality for countless individuals.

That being the case, it is important for people to be prepared in the event disaster strikes.

According to the American Council of Life Insurers (ACLI), one third of all Americans ranging in age from 35 to 65 will find themselves disabled for more than three months. ACLI also reports one in seven workers will be disabled for more than five years.

While many individuals believe that disabilities are typically the result of freak accidents, most long-term absences actually result from things such as heart disease and cancer. At the end of the day, the loss of income can be traumatic that it leads to individuals having to foreclose on their home or even file for bankruptcy.

With disability insurance, an individual has a portion of their income replaced if they become disabled and are not able to work. In many cases, a normal group plan through an employer will replace up to 60 percent of one’s salary, while supplemental plans and individual policies oftentimes cover up to 70 or 80 percent.

When it comes to the benefits from disability insurance, they typically run for a set period of years or until the individual hits retirement age. In the event individuals pay the premium out-of-pocket, meaning one’s employer does not pick up the tab, benefits are tax free.

For those looking at long-term disability policies, keep in mind they vary greatly. Individuals attempting to save a portion of money through a less structured plan could discover it less supportive. In many cases the cheaper plans have very well defined definitions when it comes to disability, thereby making it hard to claim benefits over a long period of time.

As for the different plans out there, one of those individuals should explore is group plans.

Unless in business for you; individuals should see if their employer provides long-term disability insurance.

According to America’s Health Insurance Plans, close to half of mid-to large-sized firms make available benefits that remain in play for at least five years. It is important for individuals to remember that the majority of group plans have a benefit cap, such as $5,000 a month or $60,000 a year. Also note that bonuses typically do not fall into the equation, so a group plan will only insure one’s regular salary.

Individuals looking at group plans will also want to take note that many group policies limit the period of time they will pay benefits in the event one cannot perform their job responsibilities to just two years.

Following that period, individuals will need to prove they can’t hold down any kind of work. This will keep costs down for one’s employer, along with allowing the individual to receive new job training during those initial two years that they receive benefits.

With short-term disability insurance (sick leave), individuals are able to receive compensation as soon as they’re unable to work as a result of illness, injury or the birth of a child. Many employers offer some form of coverage, ranging from just several days all the way up to one year.

As individuals will discover in some instances, the number of weeks they’re eligible for the above-mentioned benefit is determined by how many years they have worked at a business. The longer their service, the more paid sick leave they are eligible for.

With long-term disability insurance, that commences once one’s short-term benefits run out. There are no state laws that mandate employers provide long-term disability, but it is thought that half of all mid-sized to large firms do provide at least a portion of the insurance.

Those workers who decide to purchase an individual long-term disability plan or look to supplement their employer-based insurance should be sure to determine what portion of short-term disability coverage they have.

Keep in mind it doesn’t make sense to pay a premium for a long-term disability policy with a short elimination period like two months when one has short-term coverage for six months.

If you are shopping for disability insurance, paying a visit to Insurelog.com more than makes sense.