Disability insurance should be a key part of your overall financial planning. Insurance is designed to cover losses that are too big to cover with your own out-of-pocket funds. Life insurance provides a benefit to your beneficiaries should you die. Health insurance covers the cost of medical care should you or your family need it. No less important is disability insurance that covers lost income in the event that you are unable to work due to a disabling injury or illness.
Disability insurance could also be called "income insurance." Disability insurance provides an income stream in the event that you are unable to work for periods of time ranging from short-term to long-term.
Disability insurance differs from other forms of insurance like medical or life insurance in that it is specifically designed to replace a portion of your income in the event that you are unable to work for a period of time due to an illness or an injury.
Policies vary, but they typically include:
The odds of suffering a disability during your working years is far more likely than dying, according to a number of studies. Life insurance protects your family and other beneficiaries in the event of your death, but life insurance policies do not protect you against the loss of income if you become disabled and can't work.
Health insurance covers the costs of health care including doctor's visits, hospitalization, prescription drugs and many other costs that you might incur in the event of a disabling injury or illness. It does not, however, cover the loss of income arising from a disabling medical condition.
Short-term disability policies typically cover an inability to work for periods ranging for three to six months. Long-term policies typically cover disabilities for longer periods that can range from a set number of years all the way to age 65.
The two most common ways to get disability insurance are via the employee benefits coverage offered by your employer or by purchasing a policy on your own. Here are some steps to take to obtain coverage:
When shopping for private disability insurance, you can expect the following:
Some other terms/features of disability insurance that you should know:
Disability insurance is an important component of your overall financial planning. A disabling injury or illness is more likely for mid-career professionals than death. Disability coverage allows you to maintain a stream of income until such time as you are able to return to work, or in the event that you are unable to resume your career.