Why Should You Need Disability Insurance?

Most people take it for granted that they are able to awake each day and earn an income to support themselves and their family.  Remember, one of your greatest financial assets, is your earning power. One of your most valuable assets, in this regard, is the ability to be independent.  Additionally, most people do not understand that the chances of becoming disabled are higher than they would imagine, at times during their working career. Hence, disability insurance is made available to protect all of your assets. At risk of losing their homes and investments, workers and their dependents are “living on the edge,” without disability insurance protection.

Disability insurance is an insurance that is intended to replace your income if you should become sick, disabled, or hurt, and the illness or accident prevents you from earning an income in your occupation.  Disability insurance will pay anywhere from 45% to 60% of your gross income during your absence from work of your occupation.

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It is important to note however, that not every policy is the same.  Carefully scrutinizing the details and comparison-shopping is necessary when you are shopping for particular disability insurance. A choice, not necessarily being a good one, is opting for a least expensive. The odds of being paid a monthly benefit that will cover your cost of living while you are disabled are not improbable if you have purchased a low-cost insurance policy.

The purpose of this article is to provide the readers with useful information about the features of disability insurance, so that you can make an informed decision when purchasing your insurance policy.

Types of disability insurance

Short-term disability as it name implies, is a policy pays you benefits for two weeks up to two years.  Usually, your employer provides you with short-term disability policies. Short-term disability insurance pays a percentage of your salary if you become temporarily disabled, meaning that you are not able to work for a short period of time due to sickness or injury (excluding on-the-job injuries, which are covered by workers compensation insurance).

Long-term disability as it name implies, will provide you with benefits for an extended period.  Long-term disability insurance usually lasts about 5 years. When the person turns 65, this type of insurance will also expire.  Some employers will offer this type of insurance as part of employee benefit package or will make it available at a specific cost.

Non-cancelable and guaranteed renewable are the two main types of long-term disability insurance policies. An insurer cannot cancel or refuse to renew your policy as long as the required premiums are paid on time clearly defines non-cancelable and guaranteed renewable policy means. With a guaranteed renewable policy the premiums can be raised, but only if it affects the entire class of policyholders is  the significant difference between the two policies. The premium payment remains in effect as stated on the policy under a non-cancelable contract. Consequently, initial premiums for non-cancelable policies can be more expensive than guaranteed renewable policies.

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