Several Types Of Disability Insurance, Terms You Should Understand,And How To Save Money On Each Type

Disability insurance can usually be divided into two main groups, short term and long term. Each type of policy has different coverages and waiting periods, and each one is intended to cover a specific set of needs in a specific time period. A short term disability insurance policies, also called an STD, is usually intended just for a short term disability, such as a broken leg or minor car accident, as well as other injuries that will heal within a reasonable time. The elimination period for these policies can range from no waiting period to two weeks, and this type of policy usually has a maximum benefit period of two years or less, with many having a maximum of six months. Choosing a longer elimination period and lower benefit amount will allow you to save on premiums for a short term disability policy.

A long term disability insurance policy offers long term coverage. This policy will have an elimination period that ranges from just weeks all the way up several months before benefits will be paid. Long term disability insurance also has a much longer maximum time limit for benefits, and this policy can cover the insured anywhere from a a couple of years all the way up to lifetime benefits, which normally stop when you reach retirement age. It is also important to understand the two different clauses which give you protection in a disability insurance policy, and these are a policy which is either noncancelable or guaranteed renewable. A policy which is guaranteed renewable will cost less, and the insurance provider must renew the policy as long as the premiums are paid, but the rates can be increased for the policy under this protection as long as the entire rating class sees the same increase in premiums due. A noncancelable disability insurance policy allows you to pay the same premiums for life and states that the only reason your policy can be canceled is if the premiums are not paid. Your benefits can never be reduced and your premiums will never increase for the rest of your life, and this type of protection costs significantly more than a guaranteed renewable policy.

To save on your disability insurance costs, there are some terms that you should understand so that you are aware of exactly what this policy will and will not cover. Coordination of benefits is one of these terms, and under this provision your benefit amount will be reduced by any other benefits you receive as a result of being disabled. This can include social security disability benefits, employer paid benefits, and other insurance benefits. The policy you purchase will include the target amount of income provided if you are disabled, and all the benefits you receive can not exceed this target amount. This means your disability insurance will only pay the difference between the target amount, usually a percentage of your income, and what all the other benefit policies provide. Many people do not understand this so they buy excess disability insurance coverage and waste money on premiums. Determine all your other disability benefit options, and then purchase disability insurance in the amount that is needed to make up the difference in coverage limits. This will save you a substantial amount in disability insurance costs.