Disability Income Insurance
Disability income insurance provides a weekly or monthly income benefit if you are disabled due to a covered injury or sickness. This type of insurance can provide an income to partially replace the wages lost when a person is unable to work for an extended time. Policies are available to cover disability due to an accident only, or due to either accident or illness.
Disability income insurance is an extremely important kind of insurance coverage that is often overlooked. Statistically, people are three times more likely to become disabled for a period of time during their working years than they are to die during those same years, yet many people who buy life insurance fail to buy disability income insurance.
Disability income policies have waiting periods before benefits become payable. The waiting period starts after you have become disabled for a covered disability. The longer the waiting period, the lower the premium will be. The period of time for which benefits are payable can also vary considerably. Benefit periods may depend on whether the disability was caused by accident or illness. A long-term policy may provide for lifetime accident benefits and illness benefits to the age of 65. The longer the benefit period, the higher the premium will be.
What it Covers
The amount of monthly benefit provided by a disability income policy may be stated as a percentage of income or as a set dollar amount. The amount of benefit for which you can qualify is usually based on a percentage of your gross earnings, normally around 60%. A partial disability benefit may be provided, or may be available, on an optional basis.
Some policies may reduce your benefit by the amount you receive from social security or workers’ compensation so your disability benefit and social security or workers’ compensation benefits together will provide a specified income. Some companies will consider possible social security benefits when they decide the amount of benefits for which you qualify.
Occupational therapy and vocational rehabilitation benefits may also be provided by a disability income policy.
Things to be Aware of Regarding Disability Insurance
A disability income policy generally requires that you be totally disabled before benefits are paid. The definitions of total disability vary from policy to policy. There are two different definitions used in disability policies. One definition is that you are unable to perform your own occupation. The other definition is much more comprehensive requiring that you are unable to perform any occupation (for which you are suited by education or experience). This distinction can be important for jobs that require very specialized physical skills such as surgeons or loggers.
Relationship with Other Forms of Disability Insurance
If you are hurt on the job, or in a job-related activity, you probably qualify for workers’ compensation benefits. Employers, with certain exceptions, must have this insurance to pay your medical bills and pay a weekly benefit to replace some of your wages if you are injured at work. You can contact your employer or the Alaska Division of Workers’ Compensation about claims.
Social security benefits include disability benefits for long term or permanent total disability. Contact your local social security office for more information. You should consider what benefits would be available to you from social security when you are buying disability income insurance.